2020.02.1913:37:00UTC+00Strong Inflation, Rising Shares Lift Canadian Dollar

The Canadian dollar firmed up against its major counterparts in the European session on Wednesday, as the nation's consumer inflation showed a modest increase in January, while a fall in the rate of new coronavirus cases lifted investor sentiment.

Data from Statistics Canada showed that inflation rose 0.1 percent on a seasonally adjusted monthly basis in January, following a 0.4 percent gain in December

Core inflation, excluding food and energy, remained unchanged at 0.2 percent in January.

The CPI rose 2.4 percent year-on-year in January, up from a 2.2 percent gain in December.

Excluding gasoline, the CPI rose 2.0 percent in January.

Sentiment was underpinned by a fall in the number of new coronavirus cases in China.

Markets also remain hopeful that China will cut its benchmark loan prime rate Thursday to offset the economic damage caused by the coronavirus outbreak.

The loonie extended rally to a 4-week high of 83.81 against the yen from Tuesday's closing value of 82.86. The loonie may find resistance around the 86.5 level.

Data from the Ministry of Finance showed that Japan posted a merchandise trade deficit of 1,312.6 billion yen in January.

That beat estimates for a shortfall of 1,684.8 billion yen following the 154.6 billion yen deficit in December.

The loonie strengthened to 1.3215 against the greenback, a level unseen this year. Against the euro, the loonie hit the highest level since April 2017, at 1.4264. The next likely resistance for the loonie is seen around 1.30 against the greenback and 1.40 against the euro.

The loonie jumped to 0.8830 against the aussie, which was the strongest since June 2010. On the upside, resistance is likely seen near the 0.86 level.

Looking ahead, the Federal Reserve will release minutes from its January 28-29 meeting at 2:00 pm ET.