Canadian Dollar Retreats as Weak Chinese Data Weighs on Metal Prices

The Canadian dollar weakened against its US counterpart on Monday, after a decline in metal prices forced the loonie to erase some of its gains on Friday. Positive data for housing starts in April, which were released earlier today, failed to yield gains for the Canadian currency.

China’s General Administration of Customs said that the nation’s trade growth slowed down in April amid smaller demand for commodities and electronics. Chinese exports grew 8.0% in April on a yearly basis from 16.4% in March, which fell short of estimates of a 10.4% gain. Imports fell to 11.9% last month from 20.3% in the previous month to disappoint expectations of an 18.0% growth.

The data ignited a selloff in metals that took their prices down and cancelled out the positive impact of higher oil prices. Prices of crude oil had recovered to their best level in five months on Friday, which had supported the Canadian dollar. The loonie is viewed as a commodity currency due to Canada’s dependency on exports of commodities, including metals and crude oil.

Canadian exports came under fire recently after the United States announced new tariff on shipments of softwood lumber coming from Canada. The US Department of Commerce said that a new tax that averages 20% will be imposed on Canadian lumber exports, which is valued at $5 billion.

Following the announcement, Canadian Prime Minister Justin Trudeau threatened to impose a retaliatory trade action in the form of a similar tariff on US coal exports to Canada. The US Secretary of Commerce Wilbur Ross called the threat inappropriate on Saturday, adding that the US import duties on Canadian softwood lumber will not be influenced by such a threat.

The Canadian dollar failed to get support from a report on housing starts that was released at 12:15 GMT today. Canada Mortgage and Housing Corporation said that housing starts exceeded expectations by 14,000 to 214,098 units in April, but still slowed down from 252,305 units in March.

USD/CAD traded at 1.3690 as of 18:00 GMT on Monday from 1.3729 at 15:25 GMT, the pair’s highest level today. USD/CAD began the week at 1.3658. GBP/CAD was at 1.7713 after touching 1.7766 at 12:50 GMT, the strongest level for the day. GBP/CAD started trading today at 1.7725.

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