Canadian dollar advances amid strong May retail sales reading, mixed commodities

TORONTO – The Canadian dollar was higher Tuesday as retail sales for May came in much better than expected.

The loonie was up 0.36 of a cent to 97.03 cents US after Statistics Canada reported that sales ran up 1.9 per cent, much higher than the 0.4 per cent gain that economists had expected. Sales excluding autos were up 1.2 per cent.

“Forecasts for May (economic growth) will be revised higher, as will our forecast for the second quarter, which sat at 1.6 per cent before the data, and will likely be a couple of ticks higher,” said CIBC World Markets chief economist Avery Shenfeld.

There was also some reassurance about China’s economic growth after Chinese media reported Premier Li Keqiang had said that growth wouldn’t go below seven per cent. He also said that China’s economic growth needs to be kept above a minimum of seven per cent, according to Beijing News and reaffirmed 7.5 per cent as this year’s growth target.

The report cleared uncertainty about how much China’s government would let the economy slow as it tries to shift the basis of growth toward domestic consumption and away from reliance on exports and industrial investment.

Commodities were generally weaker with the September crude contract on the New York Mercantile Exchange down $1.10 to US$105.84. Prices fell almost $1 Monday following the release of soft existing home sales data and fell further Tuesday morning ahead of the latest inventory data.

Wednesday’s report on U.S. crude and fuel stockpiles from the Energy Information Administration will be watched for confirmation that the recent trend of falling inventories, which suggests stronger demand, is continuing.

Sharp drops in U.S. crude supplies for the past three weeks have helped propel oil to its highest in about 16 months.

September copper was unchanged at US$3.18 a pound. August bullion lost $5.40 to US$1,330.60 after rising $43 Monday in its biggest one-day gain since June, 2012.