TORONTO (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Friday as attention turned from Spain’s new budget to the next tests for the euro zone and North American economic data heading into the month and quarter’s end.
Canadian government data showed that the country’s economy grew by an inflation-adjusted 0.2 percent in July on strength in manufacturing, utilities and wholesale and retail trade.
The results exceeded analysts’ expectations, but June growth figures were revised down, leaving actual gross domestic product in July almost exactly as forecast.
“The economy is continuing to expand, but the pace at around 2 percent is very modest and not going to provide much downward pressure on the unemployment rate,” said Paul Ferley, assistant chief economist At Royal Bank of Canada.
“With the revision, the overall pace is still fairly moderate (and) argues for the Bank of Canada to continue to keep monetary conditions highly stimulative.”
The Canadian dollar initially strengthened immediately after the data, but quickly retreated back near Thursday’s close.
At 9:08 a.m. (1308 GMT), the Canadian dollar was trading at C$0.9810 versus the U.S. dollar, or $1.0194, little changed from Thursday’s North American session close at C$0.9809 to the U.S. dollar, or $1.0195.
Matt Perrier, a director of foreign exchange sales at BMO Capital Markets, noted recent Canadian dollar support around C$0.9855-60 and resistance at around C$0.9730-80.
“The market is just taking a bit of a sideways stance going into this morning’s data and flows,” said Perrier.
“There was chatter yesterday that the general month-end flows would be demand for U.S. dollars...the chatter and the reality are not always the same when it comes down to the actual fixing so we’ll get a better sense as we get closer to the windows,” he added, noting the end of European trading sessions at 11:00 a.m. and 12:00 p.m. (ET).
South of the border, U.S. consumer spending rose in August by the most in six months as households stretched to pay for higher gasoline prices, according to a government report on Friday.
The data pointed to lackluster economic growth in the third quarter, which briefly put further pressure on the U.S. dollar.
Markets in riskier assets were otherwise generally buoyed by expectations that the tough Spanish budget is a prelude to an EU aid program that will allow the European Central Bank to try to reduce Spain’s borrowing costs by buying its bonds.
The results of an independent audit of Spain’s banks will be published later in the day, while Moody’s Investors Service is expected to finish its rating review on the sovereign, which may lose its investment grade status.
Meanwhile, French President Francois Hollande’s Socialist government unveiled sharp tax hikes on business and the rich in a 2013 budget aimed at showing France has the fiscal rigor to remain at the core of the euro zone.
Canadian bond prices advanced across the curve, following U.S. Treasuries higher as an initially positive reception for Spain’s 2013 budget faded and traders refocused on the hurdles ahead for Madrid. <US/>
The two-year bond rose 6 Canadian cents to yield 1.071 percent, while the benchmark 10-year bond was up 30 Canadian cents, yielding 1.723 percent.
Additional reporting by Solarina Ho; Editing by Bernadette Baum