Loonie Falls After Canada Inflation Drops Unexpectedly

The Canadian dollar slipped against its major opponents in the European session on Friday, as nation's consumer price inflation unexpectedly fell in May, dampening expectations for the Bank of Canada rate hike in near future.

Data from Statistics Canada showed that CPI fell 0.2 percent on a seasonally adjusted monthly basis in May, after increasing 0.4 percent in April. Economists were looking for a 0.2 percent gain.

Excluding food and energy, inflation ticked up 0.1 percent month-over-month. This was unchanged from April's figure.

Oil prices rose on optimism over higher compliance by oil producing nations to stick to output cut deal, with overall conformity levels exceeding 100% in both April and May to reach its highest level since January 2017.

The Joint OPEC-Non-OPEC Ministerial Monitoring Committee noted that OPEC and participating non-OPEC producing countries recorded the highest conformity ever with their voluntary adjustments in production, achieving a level of 106 percent in May.

The loonie showed mixed performance in the Asian session. While the loonie held steady against the euro and the yen, it rose against the aussie and the greenback.

The loonie dropped to 83.65 against the Japanese yen, after having advanced to 84.24 at 9:00 pm ET. Continuation of the loonie's downtrend may see it challenging support around the 82.00 region.

The latest survey from Nikkei showed that Japan's manufacturing sector continued to expand in May, albeit at a slower pace, with a seven-month low manufacturing PMI score of 52.0.

That's down from 53.1 in May, although it remains above the boom-or-bust line of 50 that separates expansion from contraction.

The loonie edged down to 1.3297 against the greenback, off its early high of 1.3211. If the loonie extends weakness, it may target 1.34 as the next support level.

Reversing from an early high of 0.9966 against the aussie, the loonie weakened to 1.0064. The next possible support for the loonie is seen around the 1.015 mark.

Having advanced to 1.4740 against the euro at 8:15 pm ET, the loonie fell to 1.4863. The loonie is poised to target support around the 1.50 area.

Flash survey data from IHS Markit showed that the euro area private sector grew at the slowest pace in five months in June.

The composite output index fell to 55.7 in June from a joint six-year high of 56.8 in May. The score was forecast to drop moderately to 56.6.

Looking ahead, U.S. new home sales for May are due shortly.

At 2:15 pm ET, Federal Reserve Governor Jerome Powell gives a speech titled "Central Clearing and Liquidity" at the Federal Reserve Bank of Chicago Symposium on Central Clearing.