Loonie down: Manufacturing data mixed
Waiting for a rebound in the US economy
TORONTO — The Canadian dollar closed lower on June 2 as traders digested a mixed bag of manufacturing reports and awaited the Bank of Canada’s next interest rate announcement (June 4).
The loonie dropped 0.47% to 91.76 cents US as the RBC manufacturing purchasing manager’s index showed slowing expansion. It slid to 52.2 in May, down from 52.9 the previous month and 53.3 in March. It was the lowest reading since January.
Economists will look to see if the central bank continues to flag concerns about low inflation being the No.1 concern since inflation has been heading higher recently.
Canada’s annual inflation rate climbed to its highest level in two years, reaching two per cent in April, largely driven by an unusually big jump in energy prices.
Meanwhile, the China Federation of Logistics and Purchasing said that its monthly manufacturing index rose to 50.8 points in May, up from April’s reading of 50.4 and was the highest level this year. Any reading above 50 indicates expansion.
And in the US, the Institute for Supply Management twice corrected its May manufacturing index to show that factories grew at a strong pace last month. The original report said that manufacturers had expanded at a weaker pace.
The ISM’s manufacturing index for May now reads 55.4, up from 53.2 in the initial report. That was slightly less than the 55.8 reading that economists had forecast but the American report raised hopes for a strong economic rebound in the second quarter.
Hopes have been particularly high for a rebound after data showed that the US economy contracted by a larger than expected one per cent in the January-March period, due in large part to severe winter weather.
Meanwhile, copper prices got a lift from the strong Chinese manufacturing data.
The July copper contract was up five cents to US$3.17 a pound.
Elsewhere on the commodity markets, July crude in New York fell 24 cents to US$102.47 a barrel.
July bullion headed $2 lower to US$1,244 after losing 3.5% last week with markets feeling more comfortable about the Ukraine crisis and more concerned about deflation rather than inflation, particularly in Europe.
Economists expect about 21,000 Canadian jobs were created after the economy shed 29,000 the previous month.
In the US, economists also forecast another month of strong job gains. They expect the US government’s non-farm payrolls report will show that the American economy cranked out about 219,000 jobs following a much stronger expected 288,000 gain in April.
© 2014 The Canadian Press