The Canadian dollar showed mixed trading against its major rivals in early deals Tuesday ahead of the closely watched interest rate decision by the Bank of Canada, which is due to announce at 9:00 am ET.
The Bank of Canada is widely expected to stand pat this time too, given uncertainties surrounding around the globe, planning to leave rates unchanged at 1 percent for the 25th consecutive month.
In its last meeting, the central bank hinted the probability of withdrawing the present monetary policy stimulus. However, traders think the bleak picture of recent economic outlook may prompt the Bank of Canada governor Mark Carney to shift its forward guidance.
Latest economic data from Canada was also disappointing with the retail sales rising just 0.3 percent in August, in line with market expectations but slower than the 0.7 percent growth recorded in July.
The mood was cautious in Europe as Moody's downgraded ratings on five Spanish regions, citing that the downgrades were "driven by the deterioration in their liquidity positions."
Besides, the French industrial confidence deteriorated to the lowest level in more than three years in October as weakening external demand, especially in the crisis-stricken Eurozone, continued to weigh on the country's exports, latest data showed today.
The industrial confidence index dropped to 85 in October, after stabilizing at 90 in September, statistical office Insee said. The latest reading was the lowest since August 2009, and far below the long-term average of 100. Economists had forecast the index to remain unchanged In October.
The Canadian dollar reached 0.9977 against its US counterpart around 8:30 am ET, inching closer to parity for the first time since early August. Next key levels to watch beyond parity are 1.0080, 1.0220, 1.0340 and 1.04.
The loonie underperformed against the Japanese currency too, slipping back to near 80.0 around 8:35 am ET from a 5-day high of 80.68 hit at the beginning of Asian trading.
On the flip-side, the Canadian currency gained ground against the euro due to across the board weakness of the latter. The loonie reached as high as 1.2940 from a session's low of 1.2985.
Traders also focus across the boarder, where the FOMC meeting is scheduled to begin today, while the results of the 2-year note auction is due at 1:00 pm ET.
The Richmond Federal Reserve is due to release the results of its manufacturing survey at 10 am ET. The manufacturing index based on the survey is expected to come in at 6 for October, an improvement from 4 in the previous month.
by RTT Staff Writer
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