Greenback rises vs Canadian dollar after downbeat Canadian data; gains seen capped

On Tuesday the U.S. dollar climbed against its Canadian peer, as downbeat Canadian manufacturing sales data pressured the local currency, although a disappointing report on U.S. housing starts limited the greenback's gains.

USD/CAD reached 1.2794 during early U.S. trade, the session high; the pair subsequently consolidated at 1.2785, easing up 0.09%. The pair was likely to find support at 1.2678, the low of March 13 and resistance at 1.2825, the high of March 13 and a six-year high.

On Tuesday Statistics Canada reported that manufacturing sales dipped 1.7% in January, compared to expectations for a 1.0% decline, after a 1.6% rise the previous month.

Separately, the U.S. Commerce Department said that U.S. housing starts declined by 17.0% last month to hit 897,000 units from January’s total of 1.081 million units, worse than expectations for a decline of 2.4% to 1.049 million. Data also indicated that the number of building permits issued last month increased by 3.0% to 1.092 million units from January’s total of 1.060 million. Analysts expected building permits to fall by 0.5% to 1.065 million units in February.

Investors await Fed statement due on Wednesday to see if it would drop its reference to being patient before raising rates and signal that it is ready to hike rates depending on economic data.

The loonie was lower against the euro, with EUR/CAD gaining 0.66% to 1.3591.

The common currency found support after the upbeat data from Germany.

The ZEW Centre for Economic Research earlier said that its index of German economic sentiment rose by 1.8 points to 54.8 this month from February’s reading of 53.0. Analysts had expected the index to improve by 5.2 points to 58.2 in March.

The index of euro zone economic sentiment touched 13-month high of 62.4 in March from 52.7 in February, above forecasts for a gain to 58.2.

A separate report showed that euro zone consumer price inflation fell 0.3% in February, in line with expectations and up from 0.6% in January. However, the rate remains below the European Central Bank's target of near but just below 2%.