Investing.com - The Canadian dollar rose to fresh five-and-a-half month highs against the U.S. dollar on Monday, building on Friday’s strong gains following upbeat Canadian data on inflation and retail sales.
USD/CAD touched lows of 1.0717, the weakest since January 7 and was last down 0.21% to 1.0735.
The pair is likely to find support at 1.0600 and resistance at 1.0825, Friday’s high.
The Canadian dollar strengthened after Statistics Canada reported Friday that the annual rate of inflation rose to 2.3% in May, ahead of forecasts of 2.1%.
It was the first time in more than two years that the annual inflation rate exceeded the Bank of Canada’s 2% target, fuelling optimism over the economic recovery.
The BoC kept its benchmark interest rate on hold at 1% earlier this month, reiterating concerns that low inflation and weak exports are acting as a drag on growth.
Consumer prices were 0.5% higher in May from a month earlier, beating forecasts for 0.2%.
The loonie, as the Canadian dollar is also known, received an additional boost after a separate report on Friday showed that domestic retail sales jumped 1.1% in April, easily outstripping forecasts of 0.4%.
The release of stronger-than-expected factory data from China on Monday fuelled risk appetite.
China’s HSBC manufacturing purchasing managers’ index came in at 50.8 in June, up from a final reading of 49.4 in May. It was the first time the index has risen above the 50 level separating growth from contraction in six months.
The data eased fears over recent signs of a slowdown in the world’s second largest economy and offset data indicating that the recovery in the euro zone could be losing momentum.
The euro zone’s composite index of service and manufacturing sector activity fell to a six month low of 52.8 in June from 53.5 in May.
France’s private sector continued to contract this month, dragging on the euro zone as a whole, while Germany private sector continued to expand this month, but at a slower than forecast rate.
EUR/CAD fell to lows of 1.4560, the weakest since January 7 and was last down 0.17% to 1.4604.