Canadian Dollar Hits Six-Day Low on Weak Trade Data

The Canadian dollar retreated to a near one-week low against its southern neighbor on Thursday as the greenback saw broad gains and domestic trade data came in weaker than anticipated. The loonie was trading 0.3% lower at 1.3625 per United States dollar, or 73.39 U.S. cents, after hitting its weakest level since Friday. Economic figures from Canada revealed a trade deficit that unexpectedly widened to C$3.65 billion in January, a significant increase from the C$1.3 billion reported in December. This shift was largely attributed to a sharp decline in the export of motor vehicles and parts, driven by seasonal production halts. The result was significantly softer than the C$900 million deficit analysts had predicted. > Despite some temporary factors - weather, auto production disruptions - January’s trade figures were soft against a backdrop of elevated uncertainty. While energy prices are expected to support export figures in the near term, other trade flows are likely to face ongoing pressure. Market participants are also keeping a close eye on the United States-Mexico-Canada Agreement, which involves Mexico and is scheduled for a review by a July 1 deadline. Geopolitical tensions in the Middle East have also impacted market dynamics. The price of oil, a critical export for the Canadian economy, surged 9.2% to $95.29 per barrel following reports that Iran had escalated attacks on regional oil and transport infrastructure. This spike in energy costs fueled concerns regarding import-dependent nations, boosting safe-haven demand for the greenback. Financial institutions, including the Royal Bank of Canada, are monitoring these developments ahead of crucial economic indicators. The domestic employment report for February is scheduled for release on Friday, with forecasts suggesting a gain of 10,000 jobs and a slight rise in the unemployment rate to 6.6%. These figures will likely influence expectations for the upcoming interest rate decision by the Bank of Canada. In the fixed-income market, Canadian bond yields climbed across the curve, mirroring trends in U.S. Treasuries. The 10-year yield rose 2.2 basis points to 3.509%, having earlier reached its highest point since July at 3.519%.