News Column

Loonie unchanged on solid wholesale sales report, traders look to Fed minutes

August 20, 2014

Malcolm Morrison, The Canadian Press

TORONTO - The Canadian dollar was flat Wednesday as traders digested data showing a further increase in wholesale trade and look to the U.S. Federal Reserve for possible indications on the timing of interest rate increases.

The loonie was unchanged at 91.38 cents US as Statistics Canada reported that wholesale sales rose 0.6 per cent to $53 billion in June, a third consecutive increase.

The agency said that sales in the vehicle sector declined 2.4 per cent to $9.1 billion. But this was offset by gains in five subsectors, led by a 3.1 per cent rise in the miscellaneous subsector, which includes agricultural supplies, wholesalers of logs and wood chips, minerals, ores and precious metals, and second-hand goods

Meanwhile, the U.S. central bank's minutes from its latest meeting last month will be released mid-afternoon and traders will be looking to see how many individual Fed members feel rates have been kept too low for too long. Many analysts expect the Fed to move from rates that have hovered near zero since the financial crisis around the middle of next year.

On Friday, Fed chairwoman Janet Yellen delivers a speech at the central bank's annual economic symposium in Jackson Hole, Wyo. She is expected to again signal to the market that the central bank is in no rush to hike rates and when it does, the pace will be gradual.

She is also expected to explain why she believes there is still a lot of slack in the job market. How much slack there is in the labour market is a critical question for the central bank as it decides when to hike rates.

Recent economic data have raised speculation that the Fed could move earlier than mid-2015, which in turn would be earlier than many think the Bank of Canada will move to hike rates.

"Today, the Fed minutes are the focus and expected to support a stronger U.S. dollar as it will refocus markets on diverging interest rate paths," said Camilla Sutton, Chief FX Strategist, Managing Director Scotiabank Global Banking and Markets.

Prices were mixed on commodity markets with September crude up 72 cents to US$95.20 a barrel.

September copper was two cents higher to US$3.11 a pound while December bullion dipped $1.30 to US$1,295.40 an ounce.

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Source: Canadian Press DataFile

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