Loonie Advances As Canada Trade Deficit Narrows

The Canadian dollar strengthened against its major counterparts in the European session on Wednesday, after a data showed that the nation's trade deficit narrowed more than expected in April. Data from Statistics Canada showed that Canada's merchandise trade deficit with the world narrowed to C$1.9 billion in April from C$3.9 billion in March.

Economists had forecast a deficit of C$3.4 billion.

Canada's exports rose 1.6% to a record C$48.6 billion in April, while imports were down 2.5% to C$50.5 billion.

Meanwhile, separate data showed that Canada building permits tumbled more than forecast in April.

The building permits fell 4.6 percent in April, after rising 1.3 percent in March.

Economists were looking for a fall of 1.0 percent.

The loonie firmed to near a 2-week high of 85.64 against the yen and a 6-day high of 1.2857 against the greenback, from its early lows of 84.62 and 1.2974, respectively. On the upside, 87.00 and 1.27 are likely seen as its next resistance levels against the yen and the greenback, respectively.

The loonie advanced to a 2-day high of 0.9852 against the aussie, following a decline to 0.9919 at 1:30 am ET. If the loonie continues its rise, 0.97 is possibly seen as its next resistance level.

Data from the Australian Bureau of Statistics showed that Australia's gross domestic product rose a seasonally adjusted 1.0 percent on quarter in the first three months of 2018.

That exceeded expectations for an increase of 0.8 percent following the 0.4 percent gain in the previous three months. The loonie reversed from its early low of 1.5239 against the euro, rising to 1.5127. The next possible resistance for the loonie is seen around the 1.50 level.

Survey data from IHS Markit showed that Germany's construction sector activity expanded at the fastest pace in four months in May. The construction Purchasing Managers' Index rose to 53.9 in May from 50.9 in April.