The U.S. dollar remained fairly stable against the Canadian dollar Monday morning and was trading at 1.2545 by 11 a.m.
Monday's stable start into this trading week follows a third week of decline in the Canadian currency. Last week, the Canadian dollar suffered under rising U.S. interest rates and experienced further pressure due to weak domestic labour market data. Canada's economy suffered its first loss in jobs since September of 2004 in January, which boosted speculation that the Bank of Canada (BoC) may not increase its overnight lending rate until later in 2005. Canadian Finance Minister Ralph Goodale added to this view by stating that the latest development in the labour market would add further "downside risk". The BoC recently also did little to support the Canadian dollar by stating that Canada's economy may need up to three years to adjust to the appreciation the Canadian dollar enjoyed against the U.S. dollar during 2003. The surge led to decreasing levels of exports, which represent about 40 per cent of the Canadian economy.
The euro appreciated against the Canadian dollar Monday morning and was trading at 1.6100 by 11 a.m. The euro is currently struggling to hold on to its recent gains against the Canadian dollar in an effort to regain some ground lost since the beginning of 2005. During the past five weeks, the euro has depreciated by 3.5 per cent against the Canadian dollar, reaching its low around 1.5850. Market participants are not convinced that recent positive economic data will be enough to lead to long-lasting improvements in the Eurozone's struggling economy. Latest reports on retail sales data actually provide further evidence that a turnaround in the economy is not in sight. Retails sales fell for the fifth time in six months in January, suggesting that the Eurozone's economy will not be able to rely on domestic demand for future economic growth. In Germany, the Eurozone's biggest economy, domestic demand has not increased in three years. The European Central Bank is aware of the difficulties the Eurozone is facing and has not changed its overnight lending rate since June 2003. The bank will hold its next interest rate meeting on March 3.
Market Report given by Roman Muhlbauer, Commercial Trader, Accu-Rate Corp.
2573 Carling Ave. Ottawa, ON K2B 7H7
Tel: (613) 596-0612
E-mail: roman@accu-rate.ca
