The U.S. dollar fell sharply against the Canadian dollar Friday morning and was trading at 1.2495 by 11 a.m. A report, released by the U.S. Commerce Department on Friday, showed that the country's trade deficit widened to $57 billion in April. A poll, conducted by a leading news agency, revealed that analysts had forecast an even bigger gap of $58 billion. Both export and import levels rose from March when the trade deficit reached $55 billion. The U.S. dollar came under further pressure following the release of positive Canadian economic news. Statistics Canada reported on Friday that the Canadian economy added 35,400 new jobs in May. The data surpassed predictions by analysts who had forecast only 12,000 new jobs. The domestic manufacturing sector, however, continued to struggle and shed 18,800 jobs last month.

Friday's economic data provided mixed signals to the Bank of Canada, which recently stated that interest rates would rise over time. At no point, however, did the bank specify when an interest increase might happen. The bank's next interest rate meeting is scheduled for July 12.

The euro also dropped sharply against the Canadian dollar at the beginning of Friday's trading session and was trading at 1.5140 by 11 a.m. Friday's decline in the euro put an abrupt stop to the currency's slow recovery against the Canadian dollar, which started at the beginning of June. The Berlin-based DIW economic research institute lowered its second quarter growth forecast for the German economy to 0.2 percent from an earlier predicted 0.4 percent. This change is based on declining exports, which represent about a third of the country's economy as well as a continued weakness in consumer spending. German consumers have had little reason to increase spending over the past months as the Eurozone's largest economy continues to struggle with the highest rate of unemployment since World War II. The downward revision by the DIW followed an earlier correction by the European Commission which lowered its second quarter growth forecast for the entire Eurozone to 0.3 percent from an earlier estimated 0.4 percent.

Market Report by Roman Muhlbauer, Commercial Trader

Accu-Rate Corporation

2573 Carling Ave. Ottawa, ON K2B 7H7

Tel: (613) 596-0612

E-mail: roman@accu-rate.ca