08/08/2012 09:18 EDT | Updated 10/08/2012 05:12 EDT

Loonie moves higher while concerns return to direction of global economy

TORONTO - The loonie moved higher against the U.S. dollar Wednesday as attention turned to the global economy.

The Canadian dollar remained above parity at 100.54 cents US, ending up 0.29 of a cent.

A sense of caution is overshadowing the optimism that was prevalent in recent sessions. European stock indexes sank and the U.S. dollar rose against the euro, a sign that investors are becoming more fearful.

An inflation report from the Bank of England surprised economists with a markdown of long-term growth, though it kept its two- to three-year inflation forecast steady.

"The inflation report makes clear further weakness in output cannot automatically be seen as triggering a further policy response," said Jens Larsen of RBC Europe in a note.

"The weaker outlook for potential growth has implications for the fiscal framework: weaker growth means a weaker fiscal outlook, while lower potential output growth means a worse structural fiscal position."

China will release inflation, factory output and retail sales data on Thursday. Analysts expect inflation to fall further, which would give authorities in Beijing room to shore up slowing growth by easing credit without fear of igniting a spike in consumer prices.

In commodities, the September crude contract turned lower in the last minutes of trading on the New York Mercantile Exchange, falling 32 cents to US$93.35 a barrel.

September copper moved down 1.9 cents to US$3.42 a pound, while December gold rose $3.20 to end trading at US$1,616 an ounce.