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Canadian dollar dips as oil prices fall, Toronto home sales tumble

The Canadian dollar edged lower against its U.S. counterpart on Monday as oil prices fell, while data showed home sales tumbled in Toronto, Canada's largest city.
   
Prices of oil, one of Canada's major exports, reversed gains to trade down on concerns that top crude exporter Saudi Arabia and other Arab states' cutting of ties with Qatar could hamper a global deal to reduce production. U.S. crude prices were down 1.11 percent at $47.13 a barrel.
   
New listings of Toronto homes surged in May from a year earlier, while sales plunged and price gains slowed slightly after rules aimed at cooling the city's red-hot housing market took effect. Investors have worried that the country's economy will suffer if a potential housing bubble pops.            
 
In early trading Monday the Canadian dollar was down 0.1 percent at C$1.3493 to the greenback, or 74.11 U.S. cents. The currency traded in a range of C$1.3463 to C$1.3530.
   
Domestic data on Friday showed that exports climbed to a record high in April and first-quarter labor productivity approached a three-year high, further evidence that Canada's economy was recovering after a long slump caused by low oil prices.              
   
Still, bearish bets on the Canadian dollar have held near a record high, data from the Commodity Futures Trading Commission showed on Friday. Speculators cut net short positions on the loonie to 98,187 contracts as of May 30 from 99,109 a week earlier.            
   
Canadian government bond prices were lower across a steeper yield curve, in sympathy with U.S. Treasuries. The two-year dipped 2.5 Canadian cents to yield 0.702 percent, and the 10-year declined 17 Canadian cents to yield 1.419 percent. On Friday, the 10-year yield touched a nearly seven-month low at 1.382 percent after weaker-than-expected U.S. employment data suggested a cautious approach to interest-rate hikes from the Federal Reserve beyond June.
 
The U.S. dollar rebounded from a near seven-month low against the euro on Monday as traders doubted that any European Central Bank shift in policy stance could strengthen the euro further, while dollar repurchases after Friday's steep losses also helped the greenback.
 
ECB policymakers are set to take a more benign view of the economy when they meet on Thursday and will even discuss dropping some of their pledges to ramp up stimulus if needed, four sources with direct knowledge of the discussions told Reuters last week.
 
Complacency that the ECB will be less dovish has left the euro vulnerable to disappointment if the central bank does not satisfy those expectations, analysts said.
 
Traders also bought back the dollar ahead of the ECB meeting after a softer-than-expected May U.S. employment report on Friday hit the currency and stoked doubts that the Federal Reserve would raise interest rates in the second half of this year.
 
The euro was last down 0.3 percent against the dollar at $1.1252 after hitting $1.1285 on Friday, its highest since Nov. 9. It has been very well-flagged that the ECB will be pivoting their language around the balance of risks and the forward guidance, and that's increasingly priced in.
 
The U.S. dollar index, which measures the greenback against a basket of six major rivals, was last up 0.1 percent at 96.825 after hitting a roughly seven-month low of 96.654 Friday. Friday's decline in the dollar index, of about 0.5 percent, was its steepest in two weeks. The U.S. dollar index firmed off of Friday’s seven-month trough overnight as investors squared up their positions.
 
Sterling, on a roller-coaster ride driven by diverging opinion polls ahead of Thursday's national election, recovered after an attack on pedestrians in central London on Saturday drove a brief drop in early Asian trade. Sterling was last up 0.3 percent against the dollar at $1.2921.
 
The U.S. dollar hit a near seven-month low against the Mexican peso of 18.3325 pesos after the ruling Institutional Revolutionary Party fended of a leftist challenge in a key state election, seen as a prelude to next year's presidential elections. Against the Japanese yen, the dollar was flat at 110.41 yen.
 
Sterling rose to its highest in ten days against the dollar on Monday, with investors taking comfort from a opinion poll that gave Britain's ruling Conservative Party a comfortable lead ahead of Thursday's parliamentary elections.
 
The pound was boosted after the election was called on bets a landslide win for Prime Minister Theresa May would translate into a stronger bargaining position in Britain's exit talks with the European Union, which begin on June 19. However, some recent polls have shown the race tightening.
 
The pound had opened around half a cent down from Friday's close in Asian trading, as traders sold the currency after a militant attack in London over the weekend that killed seven and injured 48.
 
But it recovered most of those losses when trade opened in Europe, and then climbed higher after an ICM poll showed May's Conservatives 11 points in front of the Labour opposition.
 
Sterling reached as high as $1.2940 after U.S. trade opened, its highest since May 26, and putting it up around a third of a percent on the day.
 
Against the euro, the pound gained as much as 0.6 percent, trading at 87 pence versus the single currency.
 
We've got a triple-whammy on Thursday with the ECB, the UK elections, and former FBI director James Comey testimony, and the market is running short sterling into that, but that ICM poll has potentially put the Tories back on the map a bit and people are cutting short sterling positions. A dip in an index of services sector sentiment earlier had little impact.
 
Sterling has wobbled over the past two weeks, with investors' confidence that May would secure a clear victory shaken by opinion polls predicting a wide range of outcomes for the June 8 snap election - from an increased majority for the Conservatives to a hung parliament.
 
The worst case outcome is this grey area of uncertainty, the hung parliament and no stable government formed by Friday or Monday markets will sell off on that.
 
One-week sterling-dollar implied volatility a hedge against price swings in the currency was at 12.65 percent, near its highest levels since Jan. 17, when May set out her strategy for Britain's departure from the European Union.
 
World equity markets dipped with oil prices on Monday amid concerns a diplomatic rift among some key Middle Eastern energy producers may weaken a pact on output cuts, while sterling firmed as investors focused on the impending British election.
 
The U.S. dollar edged up off seven-month lows hit on Friday after a weaker-than-forecast jobs report as U.S. Treasury yields rose and markets signaled they expected the Federal Reserve to raise interest rates next week.
 
Key U.S. stock indexes were little changed to lower as investors mostly shrugged off weekend attacks in London and after Arab states cut ties with Qatar over alleged support for Islamist and Iran. [O/R][.N]
 
The Dow Jones Industrial Average was flat at 21,205.88, the S&P 500 lost 1.45 points, or 0.06 percent, to 2,437.62 and the Nasdaq Composite dropped 1.79 points, or 0.03 percent, to 6,304.00.
 
The pan-European FTSEurofirst 300 index lost 0.09 percent and MSCI's gauge of stocks across the globe shed 0.10 percent.
 
In the Middle East, Qatar's main stock index fell more than 7 percent after Saudi Arabia - the world's biggest crude oil exporter - the United Arab Emirates, Egypt and Bahrain cut ties with Qatar, accusing the Gulf Arab state of supporting terrorism. Qatar is the world's biggest supplier of liquefied natural gas and a major supplier of condensate.
 
Brent crude oil, the international benchmark, rose more than 1 percent at one point, recouping some of last week's 4 percent losses, but turned tails to drop back below $50 a barrel. It was last at $49.16, down 1.58 percent, with U.S. crude falling 1.45 percent to $46.97 per barrel.


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Economic Calendar
Australia  AU:RBA Announcement
12:30 AM ET
 
France  FR:PMI Composite
3:50 AM ET
 
Germany  DE:PMI Composite
3:55 AM ET
 
European Union  EZ:PMI Composite
3:55 AM ET
 
European Union  EZ:Retail Sales
5:00 AM ET
 
USA  US:Gallup US ECI
8:30 AM ET
 
USA  US:Redbook
8:55 AM ET
 
USA  US:JOLTS
10:00 AM ET
 
Australia  AU:GDP
9:30 PM ET
 

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