The Canadian dollar erased its recent gains against its key counterparts in the European session on Wednesday, as falling commodity prices and weakness in equities offset optimism over strong inflation data in April.
Data from Statistics Canada showed that Canada CPI rose 0.6 percent on a seasonally adjusted monthly basis in April, after a gain of 0.1 percent in the previous month. Economists has expected a 0.2 percent increase.
Core CPI, excluding food and energy, grew 0.8 percent from 0.1 percent last month.
The CPI rose 3.4 percent on year in April, up from a 2.2 percent gain in March. This was the highest annual reading since May 2011.
European markets fell as mounting worries about inflation raised speculation that central banks might be forced to tighten their monetary policies sometime soon.
The loonie fell back to 1.4777 against the euro, its lowest level since May 7. If the loonie slides further, 1.51 is possibly seen as its next support level.
Data from Eurostat showed that Eurozone inflation accelerated, as initially estimated to a two-year high in April, driven by higher energy prices.
Inflation rose to 1.6 percent in April from 1.3 percent in March. This was the highest rate since April 2019, when inflation was 1.7 percent.
The loonie weakened to a 6-day low of 89.89 against the yen, after a rise to 90.58 at 8:30 am ET. The loonie is seen finding support around the 88.00 level.
The loonie declined to 0.9407 against the aussie, after touching 0.9335, its biggest level since November 3, 2020. Next key support for the loonie is seen around the 0.96 area.
Data from the Australian Bureau of Statistics showed that Australia wage price index rose a seasonally adjusted 0.6 percent on quarter in the first three months of 2021. That exceeded expectations for 0.5 percent and was unchanged from the three months prior. On a yearly basis, the WPI advanced 1.5 percent – beating forecasts for 1.4 percent, which would have been unchanged.
The Canadian currency hit a 2-day low of 1.2102 against the greenback, down from a high of 1.2054 seen at 8:30 am ET. On the downside, 1.25 is possibly seen as its next support level.
Looking ahead, the Fed minutes from the April 27-28 meeting are set for release at 2:00 pm ET.
The material has been provided by InstaForex Company – www.instaforex.com