The Canadian Dollar has strengthened by 0.6% against the US Dollar due to a rise in commodity prices and data showing that inflation pressures remain weak.
According to Statistics Canada the nation’s consumer price index rose by 1% in March compared with the previous year and down from the 1.2% rise recorded in February, lower than the 1.1% reading that economists were expecting. The slow increase in CPI is being blamed on the decline of petrol prices, which fell by 0.3% on a year-by-year basis in March.
Commodity prices had slumped earlier in the week thanks to China’s weaker than expected GDP data release on Monday sent investors seeking shelter in the safe haven US Dollar and Japanese Yen. Commodity’s continued to shed their value as the week progressed after the International Monetary Fund announced that it was cutting its growth forecasts for global growth.
Adding to commodity based currencies worries was that the worst-hit countries of the euro zone debt crisis might use their gold reserves to deal with their problems helped sent bullion prices to their lowest levels in more than two-years.
The rise in commodities has caused the Canadian Dollar to rise but the gains could be temporary due to the weaker-than-expected CPI data.
“I think it’s going to weaken off if the CPI number comes out less than expected, because people are starting to think weaker CPI it increases the possibility the Bank of Canada would have to ease, and so a weaker Canadian dollar” Said Emimear Daly a currency analyst at Monex Europe Ltd.
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