Uptick in price of crude helps loonie climb despite big trade deficit

TORONTO – An uptick in crude prices helped give a boost to the Canadian dollar Wednesday, despite economic concerns arising from new figures that showed Canada hit a record trade deficit in April.

The oil-sensitive loonie added 0.34 of a U.S. cent to 77.17 cents US as the August contract for benchmark crude added 83 cents to US$47.43.

The S&P/TSX composite index inched up 11.49 points to close at 14,231.06, led by gains in health-care stocks, which were up 3.9 per cent, while the global gold sector rose 2.68 per cent. The metals and mining sector of the TSX was the biggest decliner, slipping 0.84 per cent.

The gains on the TSX and in the loonie came in the face of data from Statistics Canada that showed that Canada had a $3.28 billion trade deficit in May. The federal agency also revised the deficit for April to a record $3.32 billion, up from its previous estimate of $2.93 billion.

“While the trade figures were disappointing and downbeat, we are hopeful that we will see exports pick up in the second half of the year,” said Paul Vaillancourt, executive vice-president of private wealth at Fiera Capital.

Vaillancourt said he is optimistic commodity prices, particularly oil, will rise next year.

“We believe that the supply and demand side will rebalance in 2017, and so we’re also constructive on the Canadian dollar.”

In New York, markets were higher as investors shook off concerns stemming from Britain’s vote to leave the European Union and the release of minutes from the U.S. Federal Reserve’s meeting last month showing that most policy-makers wish to keep rates on hold.

The Dow Jones industrial average rose 78 points to 17,918.62, the broader S&P 500 composite index gained 11.18 points to 2,099.73 and the Nasdaq composite was up 36.26 points to 4,859.16.

“The markets have had to digest quite a lot, with the Brexit vote and the volatility that we’ve seen there,” Vaillancourt said.

“The market right now seems to lack conviction,” he added. “Lots of money on the sidelines, having breathed a sigh of relief after Brexit, but just a general lack of conviction.”

Minutes from the Fed’s policy meeting on June 14 and 15 showed that policy-makers were divided on how to proceed with interest rate hikes, but ultimately decided to wait for the outcome of Britain’s referendum on the EU.

“The last thing the Fed wants to do is destabilize the market,” Vaillancourt said.

In other commodity news, August natural gas contracts settled at US$2.79, up 2.2 cents, August gold climbed $8.40 to US$1,367.10 an ounce and September copper contracts fell three cents to US$2.15 a pound.

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