Canadian dollar pares monthly gain as data shows record economic contraction

The Canadian dollar weakened against its U.S. counterpart on Tuesday, giving up some of this month’s gain, as Sino-U.S. tensions rose and domestic data showed a record economic contraction in April due to the coronavirus pandemic.

The Canadian dollar was trading 0.2 per cent lower at 1.3678 to the greenback, or 73.11 U.S. cents. The currency, which is on track to rise 0.7 per cent in June, traded in a range of 1.3652 to 1.3699.

Canada’s real gross domestic product plunged 11.6 per cent in April from March, data from Statistics Canada showed. The decline was less than the 13 per cent predicted by analysts, but a flash estimate for a 3 per cent rebound in May was more muted than some forecasters had expected.

U.S. index futures dipped as Washington began to eliminate Hong Kong’s special status under U.S. law in response to China’s national security law on the territory and after California and Texas marked a record spike in coronavirus cases on Monday.

Canada runs a current account deficit and is a major producer of commodities, including oil, so the loonie tends to be sensitive to the global flow of trade and capital.

U.S. crude prices were down 1.8 per cent at $38.99 a barrel, pressured by rising COVID-19 cases and a possible return of Libyan oil production.

Canadian government bond yields were little changed across the curve, with the 10-year trading near flat at 0.508 per cent.

Canadian financial markets will be closed on Wednesday for the Canada Day holiday.

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