The Canadian dollar slipped to its weakest level in nearly a week on Tuesday as a sharp drop in oil prices outweighed data showing a four-year-high trade surplus. A CIBC Capital Markets economist said the export rebound behind that surplus could stall as new U.S. tariffs take hold.
The Canadian dollar fell 0.2% to 1.4070 per U.S. dollar, or 71.07 U.S. cents, on Tuesday. It touched its weakest intraday level since last Wednesday, at 1.4076, as a sharp drop in oil prices overshadowed data pointing to Canada's fourth straight month of trade surpluses.
Trade surplus reaches four-year high
Canada's trade surplus climbed to a four-year high of C$3.86 billion ($2.75 billion) in June, beating analyst expectations of a C$3 billion surplus. A weaker Canadian dollar helped lift the value of both exports and imports during the month.
"This surge in exports could easily slow or stall ahead," Andrew Grantham, a senior economist at CIBC Capital Markets, said, citing the threat of new tariffs. He said June's rebound in exports appears to have been a large driver behind the strength signaled for GDP growth in the second quarter.
Preliminary data pointed to Canada's economy growing 3.4% in the second quarter on an annualized basis. The U.S. announced new tariffs on nearly $20 billion worth of Canadian goods last month.
Manufacturing activity picks up despite soft demand
Separate data on Tuesday showed Canada's manufacturing sector expanded in July at its fastest pace in more than four years, as rising domestic activity boosted production and new orders. Weak international demand, however, raised doubts about whether the expansion can hold.
Oil slide adds pressure on the loonie
Oil, one of Canada's major exports, fell 5.7% to $75.80 a barrel after comments from Qatari and U.S. officials raised hopes for a diplomatic resolution to the Iran war that could ease oil flows through the Strait of Hormuz. That slide weighed directly on the Canadian dollar, keeping the currency near its weakest level of the week against the U.S. dollar.
Source: Investing.com
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