TORONTO - The Canadian dollar was lower Tuesday as U.S. inflation figures for June came in as expected.
The loonie edged down 0.06 of a cent to 93.14 cents US, off early lows as the U.S. Labor Department reported that the consumer price index rose 0.3 per cent in June, which matched the expectations of economists.
Analysts note that readings on U.S. inflation are considered key these days to get a clue as to when the Federal Reserve might start hiking rates since the American employment situation has improved so much over the last few months. There had been speculation that a higher than expected inflation reading would have pulled forward expectations for such rate hikes.
Scotiabank's Camilla Sutton observed in a commentary Tuesday that Fed funds futures are pricing in a conservative July 2015 interest rate hike, while "our Scotiabank house view is for Q215."
"There has been a bit of back and forth with expectations for the first interest rate hike with it being pulled forward and then pushed back," said Sutton, chief FX strategist and managing director, Scotiabank Global Banking and Markets.
Many analysts expect the Bank of Canada could also begin hiking rates next summer.
Meanwhile, geopolitical concerns eased somewhat while traders continued to consider the impact of potentially tighter economic sanctions against Russia for its support of Ukrainian rebel militias accused of shooting down a Malaysian airliner last week.
The European Union agreed Tuesday to expand a list of Russian organizations and individuals subject to asset freezes and travel bans. It also threatened to target vast sectors of the Russian economy if Moscow did not act swiftly to rein in the rebels.
But the EU stopped well short of moving to jump quickly to so-called Phase 3 sanctions that could cripple the Russian economy but also hurt recovery in Europe as well.
On the commodity markets, September copper rose one cent to US$3.21 a pound.
The September crude oil contract on the New York Mercantile Exchange slipped 47 cents to US$102.39.
August gold bullion declined $7.60 to US$1,306.30 an ounce.