Canadians Still At Parity

This past April 24 weekend, the Canadian dollar slid as inflation and retail sales came in weaker than expected

. Economists were surprised as currencies usually strengthen when interest rates increase to attract capital flows. However, the Canadian dollar managed to climb its way back up just above parity with our greenback neighbour, which was lifted due to the weaker US dollar. The Canadian loonie fought back from a low $1.0066 to the U.S. dollar, or 99.34 U.S. as the price of oil climbed above $85 a barrel following positive U.S. economic data. The currency ended the session at C$0.9991 to the U.S. dollar, or $1.0009, up from Thursday's finish at exactly C$1 to the U.S. dollar. It was up 1.4 percent for the week.

The central bank showed the annual core inflation rate was lower in March at 1.7 percent from 2.1 percent in February. Much of the cause in the push in CPI in February was temporary and due mostly to the Vancouver Olympics. This lower market reading means the bank may not have to raise the interest rates as aggressively as anticipated. Also weighing in on the currency outcome was data supporting the numbers that retail sales rose less than expected in February. Even though retail sales increased for the third consecutive month, economists were expecting a gain of 0.8 percent, up from the 0.5 percent in overall sales.

Now that the Canadian economy is back in check, the banks feel it may be time to begin removing some of the stimulus that helped get Canada out of the recession. The bank is no longer promising to keep its key rate at the record low of 0.25 percent. The next rate announcement is June 1.

The North American equity markets ended on a higher note with US stocks advancing due to increased energy and healthcare issues. Canadian bond yields had a large jump this week as well due to the anticipated bank interest increase that may come sooner and steeper than expected. The two-year Canadian Bond was up 7 cents to $99.13, yielding 1.984 percent, while the ten-year bond rose by 23 cents to $100.38, yielding 3.701 percent. Canadian bonds continued to outperform the US bonds with the two-year yield 91 basis points above its US counterpart.

With all the increase in interest rates also comes an increase in investment profits. If the central bank does indeed raise rates as expected, it may be a good idea to lock yourself in to a loan now if you are in need of one. If traditional banks are not an option for you due to bad credit, there are many private lending institutions that offer bad debt loans. They can be found on-line

by: Molly Wider

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