Loonie Extends Rise As Canadian Trade Deficit Narrows, Core Inflation Improves

The Canadian dollar extended its early rally against its major counterparts in the European session on Wednesday, as data showed that the nation's trade deficit narrowed more than expectations in February, while core inflation improved in March from last month.

Data from Statistics Canada showed that Canada's consumer price inflation remained steady in March.

The consumer price index grew 0.3 percent on a seasonally adjusted monthly basis, same as in February. Economists had forecast a 0.7 percent rise. Core inflation, excluding food and energy, accelerated to 0.4 percent from 0.2 percent in the previous month.

Year-on-year, the consumer price index rose 1.9 percent on an unadjusted basis in March, up from a 1.5 percent increase in February.

Separate data showed that Canada's merchandise trade deficit narrowed more than forecast in February.

The trade deficit narrowed to C$2.9 billion from a revised C$3.1 billion in January. Economists were looking for a shortfall of C$3.38 billion.

Exports fell 1.3 percent, while imports were down by 1.6 percent.

The currency has been trading higher amid rising risk appetite, as upbeat Chinese economic data helped ease worries about a global economic slowdown.

The loonie climbed to a 2-day high of 0.9552 against the aussie, from a 3-1/2-month low of 0.9615 seen at 10:00 pm ET. The loonie is seen finding resistance around the 0.94 level.

The loonie strengthened to 1.3274 against the greenback, its highest since March 20. This follows a low of 1.3372 hit at 9:30 pm ET. Next key resistance for the loonie is seen around the 1.30 level.

The loonie reversed from an early low of 1.5093 against the euro, rising to a weekly high of 1.5002. On the upside, 1.48 is possibly seen as the next resistance level for the loonie.

Data from Eurostat showed that Eurozone headline inflation slowed in March and core price growth eased to its lowest level in a year, as initially estimated.

Headline inflation slowed to 1.4 percent from 1.5 percent in February. In January, price growth was 1.4 percent.

After falling to 83.72 against the yen at 9:15 pm ET, the loonie changed direction, touching a 1-1/2-month high of 84.36. Should the loonie continues its rise, 86.00 is possibly seen as its next resistance level.

Looking ahead, U.S. wholesale inventories for February and Federal Reserve's Beige book report are scheduled for release in the New York session.