The Canadian dollar is strengthening midweek as wholesalers recorded their fastest two-month gain in about four years and crude oil prices continued their bullish ways. The loonieâs gains were capped on the accelerating diplomatic and economic fallout between Canada and China.
According to Statistics Canada, wholesale sales climbed 1.7% in April, up from 1.4% in March. This represents the fifth consecutive month of gains and is the best monthly increase in three years. The two-month performance is the strongest since the end of 20154
Moreover, the inventory to sales ratio declined to 1.39 in April, down from 1.40 in the previous month.
While the increase was broad, the data did point out that strong automobile sales and parts greatly contributed to the April rally, advancing 3.2% after a 1.9% decrease in March.
Rising energy prices are helping the loonie in the middle of the trading week. Crude prices have recorded gains in four of the last five trading sessions, soaring nearly 10% in that time. On Wednesday, July West Texas Intermediate (WTI) oil futures surged $1.68, or 2.91%, to $59.52 a barrel. Since crude represents a great portion of Canadaâs exports, any significant movement in oil prices affects the buck.
Canada-China relations continue to sour after Beijing announced that it would suspend all meat imports. The worldâs second-largest economy said that customs inspectors found traces of ractopamine, a restricted feed additive that is banned in China but allowed in Canada, a batch of pork products. This resulted in China suspending the imports, which is harsh news for Canadian farmers because 20% of their meat exports are shipped to China.
This comes weeks after China ceased importing other Canadian products, such as canola.
International Trade Diversification Minister Jim Carr has confirmed that regulators have launched a probe into the matter. He did not rule out financial support for the industry, but Carr noted that officials want to get to the bottom of the matter as quickly as possible.
Carr also dismissed a connection between the import suspensions and escalating tensions with China regarding Huawei and CFO Meng Wanzhou. Beijing has repeatedly demanded the release of the daughter of the technology giantâs founder who was arrested on December 1 and has been under house arrest in her Vancouver mansion.
The USD/CAD currency pair tumbled 0.38% to 1.3121, from an opening of 1.3170, at 18:10 GMT on Wednesday. The EUR/CAD fell 0.31% to 1.4924, from an opening of 1.4969.
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