Canadian dollar dips as attention turns to BoC rate decision - Reuters News
Canadian dollar dips as attention turns to BoC rate decision - Reuters News
- Canadian dollar weakens 0.1% against the greenback
- Loonie trades in a range of 1.2065 to 1.2106.
- Price of U.S. oil falls 0.2%
- Canadian 10-year yield rises 1.4 basis points to 1.470%
By Fergal Smith
TORONTO, June 7 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Monday as oil prices slipped and investors awaited a Bank of Canada interest rate decision later in the week, with the currency trading in a narrow range.
The Bank of Canada is widely expected to leave its benchmark interest rate on hold at a record low of 0.25% on Wednesday.
It could dial back some of the optimism it showed at the last policy announcement in April in response to lengthy domestic lockdowns and a weaker-than-expected rebound in the U.S. labor market, Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets, said in a note.
"A more cautious tone from the BoC" is likely, Reitzes said.
In April, the central bank signaled it could start raising its key interest rate from a record low of 0.25% in late 2022 and tapered its bond purchases. (Full Story)
The price of oil, one of Canada's major exports, eased after touching its highest level since October 2018 at $70 a barrel, pressured by the prospect of higher Iranian exports. (Full Story)
U.S. crude CLc1 prices fell 0.2% to $69.50, while the Canadian dollar CAD= was trading 0.1% lower at 1.2091 to the greenback, or 82.71 U.S. cents.
The currency, which last Tuesday touched its strongest level in six years at 1.2007, traded in a range of 1.2065 to 1.2106.
Speculators have raised their bullish bets on the Canadian dollar to the highest level since November 2019, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of June 1, net long positions had increased to 48,772 contracts from 44,811 in the prior week.
Canadian government bond yields were mixed across a steeper curve, with the 10-year CA10YT=RR up 1.4 basis points at 1.470%. On Friday, it touched its lowest since May 26 at 1.456%.
China's imports grow at fastest pace in decade as materials prices surge - Reuters News
- May exports growth misses expectations
- May imports grow at fastest pace since 2011
- May trade balance widens but misses forecasts
BEIJING, June 7 (Reuters) - China's imports grew at their fastest pace in 10 years in May, fuelled by surging demand for raw materials, although export growth slowed more than expected amid disruptions caused by COVID-19 cases at the country's major southern ports.
While a brisk recovery in developed markets has bolstered demand for Chinese products, a global semiconductor shortage, higher raw material and freight costs, logistics bottlenecks and a strengthening yuan have dimmed the outlook for the world's largest exporting nation.
China's exports in dollar terms in May grew 27.9% from a year earlier, slower than the 32.3% growth reported in April and missing analysts' forecast of 32.1%.
"Exports surprised a bit on the downside, maybe due to the COVID cases in Guangdong province which slowed down the turnover in Shenzhen and Guangzhou ports," said Zhiwei Zhang, chief economist at Pinpoint Asset Management, adding that turnover at ports in Guangdong will likely remain slow in June.
Major shipping companies warned clients of worsening congestion at Shenzhen's Yantian port in Guangdong province after the discovery of several cases among port staff. (Full Story)
On the ground in Guangdong, factories have yet to report widespread capacity cuts over the outbreak but admitted efficiency issues as they tried to meet overseas demand.
Chen Linsheng, chief operating officer at Anlan, a Shenzhen-based manufacturer of skincare and beauty-care devices, told Reuters while there was no impact on production, staff are now subject to a series of COVID tests and not allowed back into the factory without a negative result.
"We are not allowed going out (of the city). We need to report in advance and cannot even go to Guangzhou or Foshan on our own," said Chen, adding that a lot of meetings have moved back online.
Besides the impact of COVID cases in Guangdong, the global chip shortage has started to hit all of China's export items related to semiconductors, said Iris Pang, Greater China chief economist at ING.
For example, auto processing products and parts, the biggest export item, fell 4% from a year earlier, Pang added.
Two-year average growth for exports dropped to 23.4% in May from 36.3% in April, pointing to weaker export momentum as the reopening of developed economies reduce demand for personal protective equipment (PPE) and work-from-home (WFH) products, analysts at Nomura said in a note.
At the same time, the currency's extended rally in recent weeks to near three-year highs against the dollar could further saddle U.S. consumers with higher prices.
PRICE-DRIVEN SURGE
Imports increased 51.1% on year last month in dollar terms, the fastest growth since January 2011 but slower than the 51.5% rise tipped by the Reuters poll.
However, that figure -- a gauge of import values, not volumes -- was partly flattered by hot raw materials prices with demand for commodities such as coal, steel, iron ore and copper driven by easing pandemic lockdowns in many countries and ample global liquidity.
Julian Evans-Pritchard, senior China economist at Capital Economics, said while import prices increased at a rapid pace, import volumes probably edged down in May.
"Once again, supply constraints are partly to blame – inbound shipments of semiconductors continued to drop back," he said. "So too did imports of industrial metals."
Indeed, iron ore futures dipped more than 3% on Monday as the trade data cast a shadow over demand prospects. (Full Story)
China posted a $45.53 billion trade surplus for the month, wider than the $42.86 billion surplus in April but less than the $50.5 billion expected.
The Biden administration is conducting a review of U.S.-China trade policy, ahead of the expiry of the Trump-era "Phase 1" deal at the end of 2021, which called for China to increase purchases of U.S. agricultural goods and manufactured products.
Since President Joe Biden took office in January, China has increased engagement with U.S. trade and economic chiefs. China's Vice Premier Liu He spoke with U.S. Treasury Secretary Janet Yellen last week, just days after talks with U.S. Trade chief Katherine Tai.
China's May forex reserves rise to $3.22 trillion - Reuters News
BEIJING, June 7 (Reuters) - China's foreign exchange reserves, the world's largest, rose more than expected in May, official data showed on Monday, as the U.S. dollar weakened.
The data showed China's foreign exchange reserves rose $23.62 billion to $3.22 trillion last month, compared with $3.208 trillion seen in a Reuters poll of analysts and $3.198 trillion in April.
Foreign inflows into Chinese stocks and bonds have been strong as China gallops ahead of other major economies in its recovery from the coronavirus pandemic.
The yuan CNY=CFXS rose 1.6% against the dollar in May, while the dollar fell 1.6% during that month against a basket of other major currencies =USD.
China held 62.64 million fine troy ounces of gold at the end of May, unchanged from the end of April. The value of China's gold reserves rose to $119.02 billion at the end of May from $110.73 billion at the end-April.
Euro zone investor morale rises to highest level since Feb 2018 - Reuters News
BERLIN, June 7 (Reuters) - Investor morale in the euro zone rose for the fourth month in a row in June, reaching its highest level since February 2018, lifted by reopening restaurants and tourism resuming as coronavirus cases fall, a survey showed on Monday.
Sentix's index for the euro zone climbed to 28.1 from 21.0 in May. A Reuters poll had pointed to a reading of 26.0.
A current conditions index surged to 21.3 from 6.3. An expectations index eased to 35.3 from 36.8 a month earlier.
"The eurozone is increasingly leaving the painful losses of the Corona year behind," said Sentix Managing Director Manfred Huebner. "However, there is a downside to the strong economy and that is foreseeable rising prices."
Sentix surveyed 1,139 investors from June 3 to June 5.
Supply disruptions cause dip in German industrial orders in April - Reuters News
BERLIN, June 7 (Reuters) - German industrial orders dropped unexpectedly in April on falling domestic demand, data showed on Monday, as supply chain disruptions held back manufacturers in Europe's largest economy.
The Federal Statistics Offices said orders for industrial goods fell by 0.2% in seasonally adjusted terms, the first drop this year after three successive increases.
The reading confounded a Reuters forecast of a 1.0% rise and came after an upwardly revised increase of 3.9% in March.
A breakdown of the data showed that domestic demand fell by 4.3% while foreign demand rose by 2.7%.
Both consumer and capital goods posted an increase while intermediate goods contracted by 1%, the data showed.
The German economy contracted by 1.8% in the first quarter as lockdown restrictions in place since November dampened household spending and raw material shortages created manufacturing bottlenecks.
The German economy has withstood the pandemic much better than in neighbouring France or in Italy, mainly as a result of an unprecedented rescue package introduced by Chancellor Angela Merkel's right-left coalition government and a decision to keep factories open during three waves of COVID-19.
Carsten Brzeski, global head of macro at ING, linked the slight drop in orders to supply chain disruptions that were exacerbated by the blockage of the Suez Canal in early April.
"After the very disappointing start to the second quarter, with retail sales dropping by 5.5% month-on-month in April, the second hard data point for the quarter suggests that the expected rebound of the German economy has been slower than expected," Brzeski wrote in a note.
"The rebound in German industry is set to continue, only not necessarily following a straight line," he added.
Germany holds a national election in September. Merkel's conservative bloc holds a slight edge in polls over the ecologist Greens and the two parties are tipped to form a coalition after the election.
UK house prices rise by most since 2014 - Halifax - Reuters News
By David Milliken
LONDON, June 7 (Reuters) - British house prices in May were 9.5% higher than a year earlier, their biggest annual increase since June 2014, adding to signs of a boom in the property market, figures from mortgage lender Halifax showed on Monday.
Britain's housing market has seen a sharp rise in sales and prices over the past year, thanks to a government tax incentive for movers and a jump in demand for more spacious properties from richer households able to work from home.
"Heading into the traditionally busy summer period, market activity continues to be boosted by the government's stamp duty holiday, with prospective buyers racing to complete purchases in time to benefit from the maximum tax break ahead of June's deadline," Halifax managing director Russell Galley said.
House prices in May were 1.3% higher than in April, when they rose by 1.5%. Economists polled by Reuters had on average forecast a 1.2% monthly increase and a 10.0% annual rise.
Other measures of house prices have also shown big increases. Britain's official house price index showed that house prices based on transactions completed in March were 10.2% higher than a year before, the biggest rise since August 2007.
Halifax said it expected upward pressure on house prices would outlive the stamp duty reduction, which will be phased out between July and October.
"The current strength in house prices also points to a deeper and long-lasting change as buyer preferences shift in anticipation of new, post-pandemic lifestyles," Galley said.
"Greater demand for larger properties with more space might warrant an increased willingness to spend a higher proportion of income on housing," he added.
