The Canadian dollar strengthened to a near one-week high against its U.S. counterpart on Wednesday as domestic data showed a narrower-than-expected trade deficit but some gains were pared ahead of this week’s G7 summit.
Canada’s trade deficit in April shrank to a six-month low of $1.90-billion from $3.93 billion in March, as exports climbed to a record high and imports dropped, Statistics Canada said. The shortfall was considerably less than the $3.40-billion deficit forecast by analysts.
At 3:40 p.m. EDT, the Canadian dollar was trading 0.2 per cent higher at $1.2947 to the greenback, or 77.24 U.S. cents.
The loonie touched its strongest since May 31 at $1.2857 but pared its gains.
“I think there is some uncertainty as regards trade you can pin that on, especially given the fact that we do have an important G7 summit coming up this weekend,” said Bipan Rai, North America Head of FX Strategy at CIBC Capital Markets.
Top U.S. allies are set for a showdown with Washington at this week’s G7 summit in Canada as the Trump administration shows no sign of backing down from protectionist policies that have upset trading partners and unnerved investors.
The U.S. dollar fell against a basket of major currencies
after officials said the European Central Bank could wind down its stimulus program by end-2018, boosting the euro.
The price of oil, one of Canada’s major exports, fell even after Venezuela raised the prospect of a halt to some crude exports.
U.S. crude oil futures settled 1.2 per cent lower at US$64.73 a barrel.
Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries and German Bunds. The two-year fell 5 cents to yield 1.944 per cent and the 10-year declined 52 cents to yield 2.312 per cent.
The value of Canadian building permits fell 4.6 per cent in April from March, the biggest drop in five months. Canada’s employment report for May is due on Friday.