Canadian Dollar Rises on Crude Rebound, Boost in Labor Productivity

The Canadian dollar is strengthening on Thursday, driven by the rebound in crude oil prices and an increase in quarterly labor productivity. Manufacturing and trade data were also published, contributing to the near-term direction of the loonie. Despite the disappointing numbers as of late, Canadians are less pessimistic about the economy, especially after the US recently lifted tariffs.

On Wednesday, crude slipped into a bear market as oil prices cratered to a six-month low. But prices are beginning to rebound toward the end of the trading week. July West Texas Intermediate (WTI) crude futures tacked on $0.12, or 0.23%, to $51.80 per barrel on the New York Mercantile Exchange. Since oil is one of the nation’s biggest exports, the country relies heavily on the energy commodity for growth.
According to Statistics Canada, labor productivity of businesses climbed 0.3% in the first quarter to index points of 105.973, up from a 0.4% decline in the fourth quarter of 2019. The latest figure also matched market forecasts.
Earlier this week, the IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) fell to 49.1 in May, down from 49 in April. It is also lower than the median estimate of 49.9. Anything below 50 indicates a contraction.
The Ivey PMI for last month was unchanged at 55.9, beating the market consensus of 54.7.
In April, Canada’s trade deficit plunged to $970 million, down from $2.34 billion in the previous month. The market had expected a shortfall of $2.8 billion. Canada’s imports totaled $51.67 billion and exports came in at $50.7 billion.
Meanwhile, despite the gloomy feeling in the economy, Canadians are less pessimistic about the outlook, says a new poll. A Nanos Research Group/Bloomberg News survey found that the number of respondents who think the economy will weaken over the next six months fell to 30% last month, down from 36% in April. Just 16% of Canadians believe the economy will strengthen, up from 13% in April.
The USD/CAD currency pair tumbled 0.21% to 1.3391, from an opening of 1.3416, at 14:02 GMT on Thursday. The GBP/CAD dipped 0.06% to 1.7009, from an opening of 1.7018.

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