Canadian dollar flat as Europe stress, retail sales tug

Tue Jul 24, 2012 9:17am EDT
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By Jennifer Kwan

TORONTO (Reuters) - Canada's dollar was little changed against its U.S. counterpart on Tuesday as bright spots contained in a domestic retail sales report were offset by data showing Europe's debt crisis had caused a sharp slowdown in German factory activity.

Canadian retail sales grew by a weaker-than-expected 0.3 percent in May, not enough to make up for the previous month's decline and further proof of lackluster growth in the second quarter, according to Statistics Canada data. But excluding autos, the data came in stronger than expected.

"It was a decent number for Canada, but in the grand scheme of things it's going to get lost in translation," John Curran, senior vice president at CanadianForex, said of the retail sales data.

"It's a positive number. But any good news that stems from that will eventually be negated by the European situation."

At around 9:00 a.m. EDT (1300 GMT), the Canadian dollar was at C$1.0165 versus its U.S. counterpart, or 98.38 U.S. cents, up slightly from Monday's North American session close at C$1.0168 to the greenback, or 98.35 U.S. cents.

Global factors weighed on the currency, strategists said. Data showed the private sector across the whole 17-nation euro area shrank for a sixth straight month in July, mainly due to weakness in manufacturing, putting the region on track to fall back into recession.

The slowdown in German industrial activity was the biggest surprise for market analysts, contracting in July at its fastest pace in three years.

"Europe continues to dominate the market's focus here," said Matt Perrier, director of foreign exchange sales at BMO Capital Markets.   Continued...

Bank of Canada Governor Mark Carney holds the new Canadian 50 dollar bill, made of polymer, in front of the CCGS Amundsen, the Arctic research vessel depicted on the back of the new bill, in Quebec City, March 26, 2012. REUTERS/Mathieu Belanger