MD: Dollar up, traders focus on major U.S. Fed meeting, latest read on Canadian GDP
TORONTO - The Canadian dollar was higher Monday as traders focused on central bankers and the latest snapshot of Canadian economic growth.
The currency was also supported by rising commodity prices, up 0.17 of a cent to 101.02 cents US.
The latest reading of Canadian gross domestic product comes out Friday. The consensus calls for economic growth of 0.1 per cent in June, the same reading as May. This would add up to annualized growth of 1.6 per cent.
Markets ended last week on a positive note after the Wall Street Journal reported that U.S. Federal Reserve chairman Ben Bernanke had written a Republican lawmaker saying there was room for the central bank to do more to help the recovery.
And now traders are looking ahead to the Fed's annual retreat in Jackson Hole, Wyo., later this week. Bernanke delivers a keynote speech Friday while European Central Bank president Mario Draghi speaks on Saturday.
Draghi said Aug. 2 that the ECB was prepared to do whatever was necessary to keep the euro currency union intact.
Meanwhile, there were signs that the weakening eurozone economy in starting to affect Germany, Europe’s biggest economy.
German business optimism, as calculated by the Ifo business survey, fell more than expected in August.
The index released Monday fell to 102.3 points in August, down from a revised 103.2 in July. Market analysts expected 102.6.
Troubles elsewhere are starting to make themselves felt. Italy and Spain, the No. 3 and No. 4 eurozone economies, are in recessions as they try to reduce budget deficits and struggle to refinance their debts in bond markets.
Meanwhile, oil prices rose Monday amid worries that tropical storm Isaac could affect oil and refining operations in the Gulf of Mexico. An explosion at a refinery in Venezuela also pushed prices higher.
The October crude contract on the New York Mercantile Exchange gained $1.21 to US$97.36 a barrel.
Traders are concerned that the storm will be a repeat of hurricanes Katrina in 2005 and Gustav in 208, damaging Gulf refineries and pipelines and disrupting oil tanker traffic.
Other commodities were mixed with September copper unchanged at US$3.48 a pound while December gold dipped $1.70 to US$1,671.20 an ounce.
There were also hopes that the Chinese government is ready to boost the world’s second-biggest economy after Premier Wen Jiabao called for efforts to stabilize weakening exports.
The report from the official Xinhua news agency gave no indication of possible measures but Beijing previously has promised tax cuts and loans by state banks to help struggling exporters.
Export growth in July fell to just one per cent, well below forecasts, from the previous month’s 11.3 per cent growth due to weak demand in debt-crippled Europe, China’s biggest export market, and the United States, which is struggling with a sluggish recovery.
