Canadian dollar makes mild gain after increase in retail sales underwhelms

TORONTO – The Canadian dollar moved slightly higher Thursday as economists sounded a note of caution regarding a rebound in the latest retail sales data.

The loonie rose 0.11 of a cent to 97.63 cents U.S, coming off an earlier climb of 0.53 of a cent.

The report from Statistics Canada said that retail sales rose one per cent in January to $38.9 billion, on higher sales at motor vehicle and parts dealers.

That beat the 0.9 per cent that had been expected by economists, but the gain came due to higher prices, not increased sales volumes, prompting a tepid welcoming for the news.

“Consumers didn’t buy more in January; they just paid more for it,” CIBC economist Emanuella Enenajor noted.

“Stripping out the impact of higher prices, sales were flat, suggesting consumers weren’t rushing back to stores in droves after a relatively disappointing holiday season.”

Also on the radar is fear that the crisis in Cyprus will intensify. The European Central Bank has threatened to end emergency support of the nation’s banks next week unless leaders can secure more funding.

Cyprus must raise about $7.5 billion in the next four days to avoid bankruptcy. Several plans have failed, including a proposal to tax deposits held by the nation’s banks. If the Mediterranean banking haven is unable to secure a bailout, its banks will fail and it could be forced to leave the euro currency.

In commodities, copper continued its pullback on uncertainty over European demand. The May contract lost 0.12 of a cent to US$3.435 to pound. The TSX base metals sector dropped one per cent.

The May crude contract on the New York Mercantile Exchange fell $1.05 to settle at US$92.45 a barrel, as energy stocks fell 0.7 per cent.

Gold stocks led the gains, as April bullion rose $6.30 to US$1,613.80 an ounce.