The Canadian dollar had a negative trading session on Monday. The loonie was pressured downwards as the price of oil retreated and the USD advanced on the hopes President Trump will present a tax reform plan this week. The results of the first round of French presidential elections sparked an appetite in riskier assets hurting Canadian bonds as investors sold fixed income looking for higher yields.

Canadian wholesale data showed a step back of 0.2 percent in February. This is the first contraction after four straight months of gains. The forecast had anticipated a larger drop but the indicator did little to help the dollar. Wednesday’s release of retail sales will have a higher impact as the gap between the US and the Canadian economy widens.

The USD/CAD gained 0.095 in the Monday trading session. The currency pair is trading at 1.3509 after the USD got a boost from comments from US President Donald Trump to seek a 15 percent corporate tax rate as part of other tax cut to be unveiled on Wednesday. The Trump administration has yet failed to deliver on the optimism created after the election opting to push Immigration and Health care reforms ahead of the tax and infrastructure spending policies.

US Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn will head to Washington to talk to Senate Majority Leader and the House Speaker. With talk of the debt ceiling approaching and the aftermath of the healthcare reform fiasco, a tax reform should get more support from the republican base but only if it promises to deliver on the pro-growth agenda.ft.coft

The price of West Texas fell 0.645 percent in the last 24 hours. The barrel of WTI is trading at $48.86 despite the best efforts of the Organization of the Petroleum Exporting Countries (OPEC) to signal that an extension to the production cut deal is imminent. Oversupply continues to push the price of oil lower with US shale producers ramping up the number of drilling operations.

Market events to watch this week:

Tuesday, April 25
10:00am USD CB Consumer Confidence
9:30pm AUD CPI q/q
Wednesday, April 26
8:30am CAD Core Retail Sales m/m
10:30am USD Crude Oil Inventories
11:50pm JPY Monetary Policy Statement
Thursday, April 27
Tentative JPY BOJ Outlook Report
Tentative JPY BOJ Policy Rate
2:30am JPY BOJ Press Conference
7:45am EUR Minimum Bid Rate
8:30am EUR ECB Press Conference
8:30am USD Core Durable Goods Orders m/m
8:30am USD Unemployment Claims
Friday, April 28
4:30am GBP Prelim GDP q/q
8:30am CAD GDP m/m
8:30am USD Advance GDP q/q

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

The Canadian dollar depreciated on Thursday against the US dollar after US economic releases were positive and gross domestic product (GDP) forecasts were upgraded for the second quarter. The Trump administration has also put forth a plan to get the much awaited tax reform policy plan in motion. Trump had promised tax reforms and infrastructure spending out of the gate of his presidency, but had so far put higher priority in more divisive issues. The pro-growth policy and the decision to drop the border tax shows a willingness from Republicans to abandon the controversial measures to assure a tax overhaul.

The US Bureau of Economic Analysis will publish the first estimate of second quarter gross domestic product (GDP) on Friday, July 28 at 8:30 am EDT. The market is forecasting a 2.5 percent gain in the advanced 2Q GDP figures. Growth is anticipated to have accelerated after a disappointing first quarter pace of 1.4 percent. A print below the forecast would be seen as a negative for the USD with the Atlanta Fed upgrading its forecast on Thursday from 2.5 percent to 2.8 percent.

A strong rebound in GDP growth would put the dovish FOMC statement into perspective. The concerns about low inflation were blown out of proportion in the Fed communication but could go either way if the growth of the US economy disappoints on Friday. The loonie has appreciated this year thanks to strong Canadian fundamentals and the quick hawkish turn form the Bank of Canada (BoC) that translated into a rate hike in July.

The USD/CAD gained 0.881 percent on Thursday. The currency pair is trading at 1.2556 after the USD rebounded following an improved GDP forecast and the Trump administration getting back on track to pass the promised tax reform. The loonie fell with no support from economic releases and despite the rise of oil prices.

The release of the first estimate of second quarter US GDP tomorrow at 8:30 am EDT will be the the highlight of the trading session. At the same time Canadian monthly data will be released. The US is anticipated to have grown close to 2.5 percent while Canadian monthly GDP gains are expected at 0.2 percent matching last month’s release.

Economic indicators have been mixed for the US economy. The U.S. Federal Reserve hiked the benchmark interest rate in June, but is awaiting signs of accelerated growth before committing to a third rate hike this year. Inflation in the United States remain weak but if employment and growth keep their pace of growth the central bank will hike as planned. A slowdown in the progress of the US economy would trigger a more dovish Fed which could put the dollar under downward pressure.

Oil prices were behind the decision from the Bank of Canada (BoC) to cut interest rates back in 2015 so with the stability provided by the Organization of the Petroleum Exporting Countries (OPEC) and other producers limiting output it makes sense to bring the rate back to previous levels. There are rumours that the decision did not sit well with the Canadian government as it could cause pain to high debt households. Real estate prices in Vancouver and Toronto have retreated for the moment, but it will take more than 25 basis points to trigger a correction. The central bank could follow through with another hike before the end of the year to bring rates back to 2015 levels and also keep the gap between American and Canadian rates to widen.

The price of energy has gained 1.138 percent on Thursday. West Texas Intermediate is trading at $48.83 on a volatile session where crude moved more than two percent intraday. Bigger than expected drawdowns in US inventories and what appears to be a change in strategy from shale drillers as US production is anticipated to slow down has given this round to the producers who agreed to cut production.

The Organization of the Petroleum Exporting Countries (OPEC) and other major producers will continue to limit production until March of 2018 with Saudi Arabia taking a leadership role but asking for more compliance to the agreed levels of production. Disruptions in Libya and Nigeria make them exempt of the deal, but as those issues are sorted production has growth threatening the efforts of the group.

Crude has gained 4.7 percent in the last five days as US production has slowed down as evidenced by shrinking inventories. The OPEC agreement is a long way in reducing the supply glut but so far its efforts have resulted in higher oil prices. Internal dissent and the difficulties of proper production compliance will be a challenge going forward as well as a ramp up from Brazil, Canada and US operations once oil reaches higher price levels.

Market events to watch this week:

Friday, July 28
8:30 am CAD GDP m/m
8:30 am USD Advance GDP q/q

*All times EST
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

The Canadian dollar appreciated versus the US dollar on Friday after the monthly gross domestic product (GDP) in May tripled forecasts. The rebound in oil production put Canadian growth at 0.6 percent beating a forecast of 0.2 percent. Annual growth is 4.6 percent, the fastest since the year 2000.

At the same time the Canadian GDP data was released the Bureau of Economic Analysis published the first estimate of US GDP. The American economy grew by 2.6 percent in the second quarter, slightly beating expectations. Consumer spending was strong, but wage growth was a disappointment. No inflationary pressure was again present as it has been on employment reports and consumer prices. The main takeaway form the Federal Open Market Committee (FOMC) statement earlier this week was a concern with low inflation that could push back the expected final interest rate hike this year.

The Bank of Canada (BoC) cut twice in 2015 ahead of an anticipated drop in oil prices to offer some support to the economy via a lower currency. With oil prices having achieved some stability following the Organization of the Petroleum Exporting Countries (OPEC) and other major producers agreeing to limit output and the economy on the mend, the central bank has now begun to remove that stimulus. The strong GDP puts an October rate hike firmly on the table that could drive the CAD higher as it closes the interest rate gap with the USD.

The USD/CAD lost 0.734 percent in the last 24 hours. The currency is trading at 1.2446 after a strong monthly GDP figure in Canada boosting the loony ahead of the dollar. The US GDP released at the same time met the forecast but the lack of wage growth is putting more pressure on the Fed to rethink its third interest rate hike of the year. The Federal Reserve has already raised interest rates twice in 2017 and is expected to begin shrinking the balance sheet it accumulated from its QE program in the fall.

Political uncertainty has sapped the momentum out of the USD. The rally at the beginning of the year is gone after the debacle that has been the attempts to pass healthcare reform. The Trump administration is now focusing on tax reform, but it remains to be seen if they have the political capital left after a very contentious period to repeal Obamacare. Pro-growth policies were also one of the factors behind the dollar rally earlier in the year, but as they got reprioritized that shift also hurt the greenback against majors. A back to basics approach with tax reform learning the lessons from the failure to pass healthcare policies could end up boosting the dollar before the end of the year.

The loonie continues to gain versus the dollar in a rally that started when the Bank of Canada policy makers made hawkish comments back in June and compounding rhetoric changed market expectations on Canadian monetary policy. The BoC hiked interest rates in July and given the pace of growth could do so again in October. Another 25 basis points would bring the Canadian interest rate to 1 percent, where it sat prior to the 2015 cuts and a significant drop in oil prices.

The price of energy gained 1.242 percent on Friday. West Texas Intermediate is trading at $49.48 as the price of crude continues to rise. Bigger than expected drawdowns for the past three weeks and comments from US producers hinting at less output has driven prices higher. The OPEC and other major producers had so far limited output but with the US, Brazil and Canada out of the agreement the global supply glut was not being drained fast enough.

Citing a cutback in capital expenditure US operations will take a step back. At the same time Saudi Arabia has said that it will cut its production further and warned members of the production cut agreement that compliance will be more stringent to make sure stability returns to oil prices.

Oil has gained 8.41 percent in the last five days as the US dollar retreat has also made crude more expensive. Large financial institutions have cut forecasts for this year to a range around $60 per barrel. The two month high that WTI is currently sitting in is a good start, but not enough to convince investors the levels are sustainable. The biggest risk to oil prices remains the continued support from OPEC and other major producers. Infighting inside the OPEC could escalate and tear the organization apart as Saudi Arabia and Iran could take their ideological disputes a step further.

Market events to watch this week:

Tuesday, August 1
12:30 am AUD Cash Rate
12:30 am AUD RBA Rate Statement
4:30 am GBP Manufacturing PMI
10:00 am USD ISM Manufacturing PMI
6:45 pm NZD Employment Change q/q
Wednesday, August 2
4:30 am GBP Construction PMI
8:15 am USD ADP Non-Farm Employment Change
10:30 am USD Crude Oil Inventories
9:30pm AUD Trade Balance
Thursday, August 3
4:30 am GBP Services PMI
7:00 am GBP BOE Inflation Report
7:00 am GBP MPC Official Bank Rate Votes
7:00 am GBP Monetary Policy Summary
7:00 am GBP Official Bank Rate
7:30 am GBP BOE Gov Carney Speaks
8:30 am USD Unemployment Claims
10:00 am USD ISM Non-Manufacturing PMI
9:30 pm AUD RBA Monetary Policy Statement
9:30 pm AUD Retail Sales m/m
Friday, August 4
8:30 am CAD Employment Change
8:30 am CAD Trade Balance
8:30 am USD Average Hourly Earnings m/m
8:30 am USD Non-Farm Employment Change

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

Canada’s economy unexpectedly contracted in August, adding to signs of cooling following a torrid pace of growth in the first half of this year.

Highlights of August GDP Report

Key Takeaways

Most analysts are anticipating a slowdown in the second half of this year after growth was running at a 4 percent clip in the first six months of 2017. Tuesday’s numbers suggest the potential of a more pronounced drop than expected.

If the economy fails to post gains in September, third quarter annualized growth would be on pace for a sub-2 percent increase. Economists surveyed by Bloomberg News are forecasting growth to average 2.1 percent in the second half.

Other Details

Bloomberg

Manufacturing sales rose 0.5% to $53.7 billion in September, reflecting higher sales in the petroleum and coal product industry.

Overall, sales were up in 7 of 21 industries, representing 28.9% of the Canadian manufacturing sector. Sales of non-durable goods rose 1.7% to $25.4 billion, while sales of durable goods decreased 0.5% to $28.4 billion.

In constant dollars, sales increased 0.7%, indicating that higher volumes of manufactured goods were sold in September.

Petroleum and coal product sales lead the gains

Sales in the petroleum and coal product industry grew 10.3% to $5.5 billion in September, the third consecutive monthly gain. The increase reflected gains in prices and volumes for petroleum and coal product. After removing the effect of price changes, sales in volume terms increased 6.7% in September.

Sales in current dollars also increased in the machinery (+1.9%) and paper (+1.0%) industries. Sales in constant dollars for these industries increased 2.1% and 1.4%, respectively, indicating that higher volumes of goods sold were responsible for the gains.

Partially offsetting these increases in current dollars were declines in the food and transportation equipment industries. Sales in the food industry were down 1.0% to $8.4 billion in September. Widespread decreases in sales were reported, and reflected lower prices and volumes. After removing price effects, sales volumes of the food industry declined 0.4% in September.

Overall sales in the transportation equipment industry declined 0.7% to $10.3 billion, although increases in the railroad rolling stock industry (+66.8%), other transportation equipment (+36.5%) and aerospace product and parts (+5.6%) were posted in September. These gains were not sufficient to offset decreases in the motor vehicle (-5.9%) and motor vehicle parts (-2.5%) industries. After removing price effects, volumes sold declined by 4.5% and 1.2% respectively in these industries, following strong volumes in August.

Manufacturing sales up in seven provinces

Sales rose in seven provinces in September, led by Quebec and New Brunswick.

Manufacturing sales in Quebec rose 1.7% to $13.3 billion, their highest value on record. The growth in September was largely attributable to the petroleum and coal (+24.9%) and the aerospace product and parts (+10.3%) industries. The increases were partly offset by a 2.8% decline in the food industry.

In New Brunswick, manufacturing sales rose 13.1% to $1.7 billion. This was their highest level since November 2014 and reflected higher sales of non-durable goods.

After increasing 2.3% in August, sales in Ontario fell 0.9% to $24.4 billion in September. The decline was largely attributable to lower sales in the motor vehicle (-6.3%), motor vehicle parts (-2.7%) and primary metal (-3.6%) industries. These decreases were partially offset by a 5.0% increase in sales in the machinery industry.

In Alberta, sales declined 0.9% to $5.8 billion, following a 1.6% increase in August. The overall decline in September was largely driven by lower sales in the food product (-4.3%) and chemical (-2.7%) industries.

Inventory levels decline

Inventory levels fell for the fourth consecutive month, down 0.7% to $73.3 billion in September. Inventories were down in 10 of 21 industries, led by the transportation equipment (-2.8%), primary metal (-2.0%) and machinery (-1.7%) industries. These decreases were partially offset by a 4.1% rise in the petroleum and coal product industry.

The inventory-to-sales ratio fell from 1.38 in August to 1.36 in September. The inventory-to-sales ratio measures the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.

Unfilled orders decrease

Unfilled orders declined 1.1% to $85.1 billion in September. Most of the decrease was attributable to a drop in unfilled orders in the aerospace product and parts industry, as well as the other transportation equipment industry.

These declines were partially offset by an increase in unfilled orders in the motor vehicle and machinery industries.

New orders decreased 1.7% to $52.8 billion, following a 5.2% gain in August. The decline was mainly attributable to fewer new orders in the aerospace product and parts industry and in the motor vehicle industry. The decrease was partially offset by higher new orders in the petroleum and coal product industry.

StatsCanada

December Fed rate hike priced in but fundamentals favour EUR

The US dollar depreciated on Friday touching a five week low against major currencies. The US Thanksgiving holiday truncated the week with European economic data outperforming US indicators. The US closed the week with disappointing purchasing manager index (PMI) estimates in the manufacturing and service sectors. European PMIs beat estimates and on Friday German confidence data rose more than forecasted. US President Donald Trump will meet with Senate Republicans to discuss the vote on the Senate bill to be voted later in the week.

The euro was boosted by political news out of Germany. After German Chancellor Angela Merkel failed to reach a coalition with three other parties the head of Germany’s second largest party and former partner in the grand coalition was seen relaxing his opposition to once again form a partnership with Merkel’s SDU. Earlier in the week the German leader had said that she preferred a new round of elections than a minority government.

Stability in German politics also boosted the pound. The British currency reached a 2 month high after the Brexit divorce is now more likely to be smoother than the original rhetoric from both sides made it seem. Prime Minister Theresa May still has to convince her own party and the EU that they will pick up the tab for the divorce if the UK wants to move onto trade negotiations.

Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna alongside Russia and the other major producers that have taken part in the production cut agreement. The deal is set to expire in March, but comments from both camps have hinted at a possible extension that could very well be announced at the end of the summit. The energy producers will meet on Thursday, November 30.

The EUR/USD gained 1.03 percent this week. The single currency is trading at 1.1909 due to positive indicators and some headway into a new coalition in German politics. The pair was flat earlier in the week but the miss in US durable goods sales (–1.2 percent). The main event in the US before the Thanksgiving holiday was the publication of the Federal Open Market Committee (FOMC) minutes from the November meeting. The market is already pricing in a rate hike in December, but further evidence of the internal debates regarding US inflation were expected. The minutes did not disappoint as there seems to be a strong contingent of Fed voting members who are concerned with weak inflation. That anxiety is not likely going to affect the coming rate hike, but will dampen the pace of rate hikes in 2018.

The Conference Board will release the US consumer confidence report on Tuesday, November 28 at 10:00 am EST. American consumers have remained optimistic about economic conditions, but sometimes that confidence has not correlated to increased spending. US preliminary quarterly GDP will be published on Wednesday, November 29 at 8:30 am EST. Economists are forecasting a 3.3 percent gain in a refinement on the first estimate. Manufacturing PMI data will be published by the Institute for Supply Management on Friday, December 1, at 10:00 EST with the disappointing advanced manufacturing PMI data from Markit on manufacturing posted earlier today, investors will be closely following the release.

The USD/CAD lost 0.46 percent in the last five trading days. The currency pair is trading at 1.2711 as the softness of the US dollar combined with higher oil prices. Weak Canadian retail prices on Thursday were not enough to stop the loonie rally. Sales rose less than expected in September despite gas prices rising. Vehicle and clothing purchases declined validating the caution expressed by the Bank of Canada (BoC) of late. The central bank hiked twice in 2017 putting the Canadian benchmark rate at 1.00 percent, but with concerns about NAFTA, economic growth slowing down are enough to keep the BoC in the sidelines until next year.

Friday, December 1 will be a busy week for CAD traders. Statistics Canada will release the monthly GDP figures as well as the employment report both at 8:30 am EST. GDP is expected to have shrunk by 0.1 percent and there is some anxiety on the job front as the first ADP job report for Canada showed a loss of 5,700 in October.

Energy prices continued to gain during the week. The price of West Texas Intermediate is trading at $58.48 after a weak dollar and Russian Energy Minister comments supporting a possible extension of the OPEC production cut agreement. Oil ministers will meet in Vienna on Thursday a year after a deal was reached to reduced crude production to stabilize prices by the Organization of the Petroleum Exporting Countries (OPEC). Russia and other major producers joined the agreement in December, and have already extended the deal until March of 2018, but the likely outcome from the meeting in Vienna is a second extension. The main topic of debate is for how long as different timelines have been discussed. Russia has taken the leadership position in a time when Saudi Arabia is opening too many fronts in the diplomatic arena.

The mercurial nature of OPEC members has already resulted in failed summits in the past, but it appears that Russia is seen as a conciliatory third party that could push through an extension.

Market events to watch this week:

Tuesday, November 28
2:00am GBP Bank Stress Test Results
10:00am USD CB Consumer Confidence
11:15am CAD BOC Gov Poloz Speaks
3:00pm NZD RBNZ Financial Stability Report
Wednesday, November 29
All Day All OPEC Meetings
8:30am USD Prelim GDP q/q
10:30am USD Crude Oil Inventories
7:00pm NZD ANZ Business Confidence
7:30pm AUD Private Capital Expenditure q/q
Thursday, November 30
8:30am USD Unemployment Claims
Friday, December 1
4:30am GBP Manufacturing PMI
8:30am CAD Employment Change
8:30am CAD GDP m/m
10:00am USD ISM Manufacturing PMI

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

The Canadian dollar’s slide has paused on Friday, after four straight losing sessions. Currently, USD/CAD is trading at 1.2882, down 0.12% on the day. The Canadian dollar has suffered a rough week, declining 1.3 percent. On the release front, it’s a busy day in Canada, with three key releases. GDP, which is released monthly, is expected to post a small gain of 0.1%. Employment Change is forecast to slow to 10.2 thousand, and the unemployment rate is expected to edge lower to 6.2%. Later in the day, the US releases ISM Manufacturing PMI, which is expected to dip to 58.4 points. We’ll also hear from FOMC members Robert Kaplan and Patrick Harker. Traders should be prepared for some movement from USD/CAD during the North American session.

Canada’s economy has slowed down, as GDP numbers have softened in the second half of 2017. In July, GDP came in at a flat 0.0%, and this was followed by a decline of 0.1%, in August, the first contraction since October 2016. Another weak reading for GDP on Friday could make investors frown and hurt the shaky Canadian dollar. On Thursday, USD/CAD climbed to a high of 1.2909, breaking above the 1.29 line for the first time since October 31. Weaker economic activity has given the Bank of Canada some breathing room, and the BoC is not expected to raise interest rates before April 2018. As well, uncertainty over NAFTA, which the US has threatened to torpedo, is weighing against another rate hike.

All eyes are on Washington, as the Senate is set to vote on its version of tax reform. A vote was expected on Thursday night, but this has been delayed until Friday. Republican lawmakers are confident that they have the necessary votes to pass the bill, but with the vote expected along party lines, the results will be close. If the Senate does pass the bill, the stock markets and US dollar will likely respond with gains. The next step in the tax reform saga would be for the House and Senate to bridge the differences between the two bills and come up with a single version, which would have to be voted on by both the House and the Senate.

USD/CAD Fundamentals 

Friday (December 1)

• 8:30 Canadian Employment Change. Estimate 10.2K
• 8:30 Canadian GDP. Estimate 0.1%
• 8:30 Canadian Unemployment Rate. Estimate 6.2%
• 9:30 US FOMC Member Robert Kaplan Speaks
• 9:45 US Final Manufacturing PMI. Estimate 53.8
• 10:00 US ISM Manufacturing PMI. Estimate 58.4
• 10:00 US Construction Spending. Estimate 0.5%
• 10:00 US ISM Manufacturing Prices. Estimate 67.0
• 10:15 US FOMC Member Patrick Harker Speaks
• All Day – US Total Vehicle Sales. Estimate 17.5M

*All release times are GMT

*Key events are in bold

USD/CAD for Friday, December 1, 2017

USD/CAD, December 1 at 7:10 EDT

Open: 1.2897 High: 1.2902 Low: 1.2854 Close: 1.2882

USD/CAD Technical

USD/CAD posted small losses in the Asian session and is steady in European trade

• 1.2860 was tested earlier in support and remains a weak line
• 1.3015 is the next resistance line
• Current range: 1.2860 to 1.3015

Further levels in both directions:

• Below: 1.2860, 1.2757 and 1.2630
• Above: 1.3015, 1.3165 and 1.3268

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little movement in the Friday session. Currently, long and short positions are evenly split, indicative of a lack of trader bias as to what direction USD/CAD will take next.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The Canadian dollar continues to show little movement this week. In the Tuesday session, the pair is trading at 1.2424, down 0.12% on the day. On the release front, there are no Canadian events. In the US, Consumer Confidence is expected to rise to 123.2 points. As well, President Trump will deliver his State of the Union address before Congress. On Wednesday, there are a host of key indicators in the US, led by ADP Nonfarm Employment Change. The Federal Reserve will release a monetary policy statement, with the markets expecting the benchmark rate to remain unchanged at a range between 1.25%-1.50%. Canada releases GDP for December, which is expected to climb to 0.4%.

The Federal Reserve will release a rate statement on Wednesday, the final one under Janet Yellen’s tenure. It’s a virtual certainty that the Fed will leaves rates unchanged this time around, although it’s likely that the Fed will raise rates by a quarter-point at the March meeting. Yellen will make way for Jerome Powell, who takes over as chair in early February. Powell is expected to hold the course on monetary policy, which was marked by small, incremental interest rates in order to keep the US economy from overheating.

The markets have become accustomed to GDP releases above 3.0% in the US, so Advance GDP for Q4 was disappointing. The reading of 2.6% fell short of the estimate of 3.0%. The economy grew 2.3% in 2017, compared to 1.6% in 2016. Growth in Q4 was affected by stronger consumer spending, which led to a surge in imports. At the same time, the increase in consumer spending also boosted inflation, as the personal consumption expenditures index, which the Fed prefers to use, rose 1.9% in the fourth quarter, up from 1.3% in Q3. Meanwhile, the US manufacturing sector is booming, as durable goods orders in December hit 2.9%, crushing the estimate of 0.6%. This was the highest gain in six months, and helped make 2017 a banner year. Durable good orders increased 5.8% in 2017, the sharpest expansion since 2011.

USD/CAD Fundamentals

Tuesday (January 30)

• 9:00 US S&P/CS Composite-20 HPI. Estimate 6.3%
• 10:00 US CB Consumer Confidence. Estimate 123.2
• 21:00 President Trump Speaks

Wednesday (January 31)

• 8:15 US ADP Nonfarm Employment Change. Estimate 191K
• 8:30 US Employment Cost Index. Estimate 0.5%
• 8:30 Canadian GDP. Estimate 0.4%
• 8:30 Canadian RMPI. Estimate -2.2%
• 9:45 US Chicago PMI. Estimate 64.3
• 10:00 US Pending Home Sales. Estimate 0.5%
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate

*All release times are GMT

*Key events are in bold

USD/CAD for Tuesday, January 30, 2018

USD/CAD, January 30 at 8:15 EDT

Open: 1.2340 High: 1.2380 Low: 1.2310 Close: 1.2424

USD/CAD Technical

USD/CAD edged higher in the Asian session. In European trade, the pair posted slight gains but has retracted.

• 1.2190 is providing support
• 1.2351 was tested earlier in resistance and is under pressure. This line could see more activity in the North American session
• Current range: 1.2190 to 1.2351

Further levels in both directions:

• Below: 1.2190, 1.2060 and 1.1903
• Above: 1.2351, 1.2494, 1.2630, and 1.2757

OANDA’s Open Positions Ratio

USD/CAD ratio is almost unchanged in the Tuesday session. Currently, long positions have a majority (59%), indicative of trader bias towards USD/CAD continuing to move to higher ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dollar Lower Awaiting Employment Data and Fed Statement

Chair Yellen’s Last Fed Meeting as Chair

The USD is trading lower versus most majors ahead of US President Donald Trump’s first State of the Union address, January’s monetary policy statement from the US Federal Reserve and the ADP private payrolls report. Strong economic data from both sides has seen the EUR/USD gain in the last 24 hours with a little bit of help from the US Treasury secretary who said today that a strong dollar would be in the country’s best interest.

• Trump will deliver his first State of the Union address
• US private payrolls forecasted to have added 191,000 jobs
• Fed expected to keep rates unchanged on Janet Yellen’s last meeting as Chair

The EUR/USD gained 0.12 percent on Tuesday. The single currency is trading at 1.2396 after strong eurozone data was released today. The yearly GDP growth was higher than the estimate at 2.7 percent and validating the forecasts for an end of QE and higher rates by the end of the year. The European Central Bank (ECB) has tried to tone down optimism but the market is buying EURs as political uncertainty remains in the US despite strong fundamentals and tighter monetary policy.

European inflation has remained subdued and one of the main talking points by ECB President Mario Draghi. The European Consumer Price Index (CPI) estimate will be released by Eurostat on Wednesday, January 31 at 5:00 am EST. A higher than the expected 1.3 percent reading could further pressure the central bank to act sooner rather than later to shift from stimulus to tightening.

The U.S. Federal Reserve hiked three times in 2017 and is on track to do the same in 2018. Fed Chair Janet Yellen will step down later this week with Jerome Powell ready to assume the reigns of the central bank. With no press conference in the January meeting the market will be left to scan the statement looking for clues, but more will come in March when Powell helms his first Federal Open Market Committee (FOMC) and faces the financial press.

The ADP non farm payrolls report will be published on Wednesday, January 31 at 8:15 am EST. Economists are anticipating a gain of 191,000 jobs slowing down from the 250,000 gains in December. The ADP report will set further expectations for Friday’s release of the U.S. non farm payrolls (NFP) expected to add 184,000 jobs after the disappointing 148,000 at the end of last year.

The USD has been on the back foot against major currencies for most of 2018. The rally that followed the victory of Donald Trump in the November 2016 elections was driven by tax reform and infrastructure promises. The 12 month period before the promise and the reality proved to be too much for a market that was expecting a quicker turn around and the greenback depreciated in 2017. This year follows a similar trend with the euro hitting three year highs and even the pound recovering to pre-Brexit levels thanks to a softer dollar.

Market events to watch this week:

Wednesday, January 31
8:15am USD ADP Non-Farm Employment Change
8:30am CAD GDP m/m
10:30am USD Crude Oil Inventories
2:00pm USD FOMC Statement
2:00pm USD Federal Funds Rate
Thursday, February 1
4:30am GBP Manufacturing PMI
10:00am USD ISM Manufacturing PMI
Friday, February 2
4:30am GBP Construction PMI

*All times EST
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

The Canadian dollar has posted slight losses in the Wednesday session. Currently, the pair is trading at 1.2281, down 0.45% on the day. On the release front, Canada releases GDP for December, which is expected to climb to 0.4%. Canada will also release an important inflation indicator, the Raw Materials Price Index. The markets are braced for a sharp drop of 2.2%. In the US, the markets will get a good look at employment numbers, starting with ADP Nonfarm Employment Change. The indicator is expected to slow to 186 thousand. The Federal Reserve will release a monetary policy statement, with the markets expecting the benchmark rate to remain unchanged at a range between 1.25%-1.50%. On Thursday, the US publishes unemployment claims and the ISM Manufacturing PMI.

The latest round of negotiations over NAFTA ended in Montreal last week, and there were no breakthroughs. Still, the sides continue to talk, and a Merrill Lynch has lowered the odds of the US leaving the pact to 25 percent. The US has demanded far-reaching concessions from Canada and Mexico, such as shifting more auto production to the US. Canada and Mexico are strongly opposed to the US demands, but both economies would take a sharp hit if NAFTA is terminated. At the same time, many US businesses don’t want to blow up NAFTA and are pressuring President Trump to remain in the trade pact. The next round of negotiations is scheduled for late February in Mexico.

All eyes are on the Federal Reserve, which will make a rate announcement on Wednesday, the final one under Janet Yellen’s watch. The tone of the rate statement could affect investor sentiment and have an impact on the currency markets. It’s a virtual certainty that the Fed will leaves rates unchanged this time around, although it’s likely that the Fed will raise rates by a quarter-point at the March meeting. Yellen will make way for Jerome Powell, who takes over as chair in early February. Powell is expected to hold the course on monetary policy, which was marked by small, incremental interest rates in order to keep the robust US economy from overheating.

USD/CAD Fundamentals

Wednesday (January 31)

• 8:15 US ADP Nonfarm Employment Change. Estimate 191K
• 8:30 Canadian GDP. Estimate 0.4%
• 8:30 Canadian RMPI. Estimate -2.2%
• 8:30 Canadian IPPI. Estimate -0.2%
• 8:30 US Employment Cost Index. Estimate 0.6%
• 9:45 US Chicago PMI. Estimate 64.2
• 10:00 US Pending Home Sales. Estimate 0.5%
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate

Thursday (February 1)

• 8:30 US Unemployment Claims. Estimate 237K
• 10:00 ISM Manufacturing PMI. Estimate 58.7

*All release times are GMT

*Key events are in bold

USD/CAD for Wednesday, January 31, 2018

USD/CAD, January 31 at 8:00 EDT

Open: 1.2337 High: 1.2348 Low: 1.2272 Close: 1.2281

USD/CAD Technical

USD/CAD has posted slight losses in the Asian and European sessions

• 1.2190 is providing support
• 1.2351 is the next resistance line
• Current range: 1.2190 to 1.2351

Further levels in both directions:

• Below: 1.2190, 1.2060 and 1.1903
• Above: 1.2351, 1.2494, 1.2630, and 1.2757

OANDA’s Open Positions Ratio

USD/CAD ratio is almost unchanged this week. Currently, long positions have a majority (59%), indicative of trader bias towards USD/CAD reversing directions and moving to higher ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The Canadian dollar is higher on Wednesday after the economy accelerated its growth in November. Canadian GDP is posted monthly and showed a gain of 0.4 percent in November. The Canadian economy started 2017 with a bang which led the Bank of Canada (BoC) to raise rates twice before a slowdown in the third quarter. The two 25 basis points rate hikes, the overall strength of the economy, recovery energy prices and a soft US dollar continued to boost the loonie. In 2018 the BoC has hiked once more leaving the benchmark rate at 1.25 percent.

The Canadian currency has enjoyed a strong start to 2018 and is more than 2 percent higher than the USD year to date. The political uncertainty in the US that delayed pro-growth policies until the end of 2017 remain. The fate of NAFTA has kept the Canadian dollar under pressure as the end of the original timeline fast approaches. The negotiations have shown little progress and with only two rounds to go, the end result could be all parties walking away empty handed. Elections in Mexico and the United States this year will further complicate negotiating in such a divisive topic as trade.

The USD/CAD lost 0.24 percent on Tuesday. The currency pair is trading at 1.2304, a four month high, after the release of the monthly gross domestic product in Canada for November. The 0.4 percent gain is the biggest gain since May 2017 and a signal that growth is back on track after a slowdown in the third quarter.

The U.S. Federal Reserve kept its benchmark interest rate at 1.25 – 1.50 percent on Wednesday. The meeting will mark the last time for Janet Yellen as Chair of the central bank. Jerome Powell will take over next week and with no meeting scheduled for February the Fed is expected to lift rates in March to mark the start of the Powell era.

Prime Minister Justin Trudeau told the CBC earlier that he does not think the US will pull out of NAFTA. The PM is aware that it is a possibility and his government is working on contingency plans. Also today US Secretary of Commerce Wilbur Ross said that the renegotiations are far from being completed at this point. He did recognize that progress has been made, but very little of it in the hard issues.

During his first State of the Union address President Trump mentioned that the US had entered into unfair trade deals and his goal was to turn that page on that period. Pro-growth policies were late to arrive, but after the tax reform gave Trump his first policy victory he intends to build on it by proposing a 1.5 trillion dollar infrastructure spending legislation.

Oil prices are recovering from a drop earlier in the session. West Texas Intermediate is trading at $64.55. The weekly US crude inventories report by there Energy Information Administration (EIA) surged by 6.8 million barrels. The forecast was a mild 100,000 barrels, but it appears the cold weather has slowed down refineries in the south resulting in the buildup. The surprise to the upside was balanced with a larger than expected drawdown of gasoline stockpiles.
Market events to watch this week:

Thursday, February 1
4:30am GBP Manufacturing PMI
10:00am USD ISM Manufacturing PMI
Friday, February 2
4:30am GBP Construction PMI

*All times EST
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

US central bank members in full force on Friday

The USD appreciated during the week against major pairs. The currency got a boost from the release of the minutes from the January Federal Open Market Committee (FOMC) meeting. The brief statement was slightly hawkish, but the full notes from the meeting revealed the US central bank upgraded its economic projections from those made in December and expects the 2 percent inflation target to be met in the mid term. The meeting marked the end of the Janet Yellen era at the helm of the Fed, Jerome Powell will chair the central bank with his inaugural testimony in Washington on February 28 at 8:30 am EST.

• Fed speakers and FOMC minutes to make way for inflation data
• Fed Chair Jerome Powell to deliver semiannual monetary policy report
• Canadian Monthly GDP to give full view of 2017 growth

Dollar Gains After Hawkish FOMC Minutes

The EUR/USD lost 0.83 percent during the week. The single currency is trading at 1.2306 after the notes from the European Central Bank (ECB) and the U.S. Federal Reserve policy meetings in January were released. While the Fed added more details to its hawkish statement the ECB continued to signal inflation in the Eurozone is not strong enough to normalize its monetary policies. The governing council is not taking off the table that this could not change soon but are worried about the market’s reaction. Communication has been an issue for the ECB and not all the kinks have been worked out as the market expects a reduction in stimulus, but the majority of ECB members see this as premature. Fed Chair Powell will present the Semiannual Monetary Policy Report before the House Financial Services Committee and will take questions. The Fed is expected to lift interest rates at the March Federal Open Market Committee (FOMC) meeting and investors will be following Powell’s testimony for clues about the Fed’s rate hike path.

European Central Bank (ECB) Mario Draghi will also be active during the week when he testifies before the European Parliament Economic and Monetary Affairs Committee. The EUR has appreciated during the start of the year as European growth expectations could finally be at a point where the ECB feels confident scaling back its stimulus program. With US growth and higher interest rates already priced into the USD the EUR had more upside, but as the ECB hesitates to signal a clear end to its QE program and higher rates in 2018 the single currency could suffer.

Fed members were in full force during the week picking up on the trends set down by the FOMC minutes. Growth projections have improved and fiscal policies are anticipated to have a short term positive effect. The CME FedWatch tool is showing a 83.1 percent probability of a rate hike during the March 21 Fed meeting.

The USD/CAD gained 0.79 percent during the last five trading days. The currency pair is trading at 1.2684 on Friday after the higher than expected consumer price index (CPI) released at 8:30 am EST. Inflation in Canada was 1.7 percent in January a slowdown from the 1.9 percent reading in December, but is still posting to an upward trend in consumer prices. The Bank of Canada (BoC) hiked interest rates three times in 2017 and with inflationary pressures it is expected to hike another three in 2018.

Disappointing retail sales in December and other economic indicators have weighed more heavily on the loonie than the higher oil prices that have remained above $60 per barrel despite the present threat of higher production from Canada, Brazil and the US. Higher inflation provided a breather for the CAD as it regained some ground versus the USD appreciating 0.39 percent, but not enough to end on a positive note for the week. NAFTA uncertainty still weighs heavily on the Canadian currency with the trade pact renegotiation still with little to show for it as the end of the talks is fast approaching and with elections in Mexico and the United States the trade deal could be further politicized further complicating a three way agreement this year. Negotiators being the second to last round of talks in Mexico city on Feb 25 until March 5.

Oil prices rose in weekly trading for a second week in a row. West Texas Intermediate is trading at $63.69 on Friday. Weekly inventories in the US surprised with a a drawdown of 1.6 million barrels when the forecast called for a rise in crude stocks of 1.9 million barrels. The main factor keeping prices at current levels is the anticipated ramp up in production from US shale companies. Demand for the black stuff has not kept up with supply which is what caused the commodity prices to free fall three years ago until the Organization of the Petroleum Exporting Countries (OPEC) got together with major producers to sign an agreement to limit production. The timing has not worked out for US shale with weather factors holding back higher rig counts.

The softer dollar in the beginning of 2018 also contributed to higher oil prices, but as the greenback is finding its feet as fiscal and monetary policy aligns for higher growth it could also weigh on the price of crude.

Market events to watch this week:

Monday, February 26
9:00am EUR ECB President Draghi Speaks
Tuesday, February 27
8:30am USD Core Durable Goods Orders m/m
10:00am USD CB Consumer Confidence
7:00pm NZD ANZ Business Confidence
Wednesday, February 28
8:30am USD Fed Chair Powell Testifies
8:30am USD Prelim GDP q/q
10:30am USD Crude Oil Inventories
7:30pm AUD Private Capital Expenditure q/q
Thursday, March 1
4:30am GBP Manufacturing PMI
10:00am USD ISM Manufacturing PMI
Friday, Mar 2
Tentative GBP Prime Minister May Speaks
4:30am GBP Construction PMI
8:30am CAD GDP m/m

*All times EST
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

The Canadian dollar has posted slight losses in the Friday session. Currently, USD/CAD is trading at 1.2859, up 0.17% on the day. On the release front, Canada releases GDP, with the markets braced for a negligible gain of 0.1%. The US publishes UoM Consumer Sentiment, which is expected to jump to 99.4 points.

Global stock markets are seeing red on Friday, after US President Trump announced that he would be imposing stiff tariffs on steel and aluminum, in order to protect domestic producers. Under the new scheme, foreign steel will be taxed at 25% and aluminum at 10%. The response to the move was overwhelmingly negative, both abroad and in the US. China, Canada and the EU immediately denounced the move. US auto makers and oil and gas producers also condemned the tariffs, saying they could get caught in the middle of a nasty trade war if other countries retaliate. In imposing the tariffs, Trump relied on a provision which allows such measures for national security, but clearly, US trading partners will not quietly accept these protectionist measures.

Canadian policymakers continue to look with growing alarm at protectionist moves by the Trump administration. Negotiations on NAFTA have not shown much progress, as a seventh and final round of talks are underway in Mexico City. As if the headache of a possible blowup of NAFTA wasn’t bad enough, the Canadian government now has to deal with the stiff imports that President Trump is set to apply to steel and aluminum imports. With some 80% of Canadian exports heading south to the US, Canada can ill afford a trade war with its giant neighbor. Still, the government will be under pressure to respond forcefully and stand up for its domestic steel industry.

The Bank of Canada is one of many spectators monitoring events at the Federal Reserve. With the Fed expected to raise rates up to four times in 2018, the BoC will be pressed to match rate hikes with its southern neighbor, or risk having the Canadian currency head lower. Currently, the BoC is projecting only two rate hikes in 2018. Strong growth has propelled the BoC to raise rates three times since July, but there are some factors weighing against a rate hike before May. First, fourth quarter expansion may fall short of the BoC’s forecast of 2.5%. As well, the future of NAFTA remains unclear, as negotiations between Canada, Mexico and the US have floundered. If the US decides to pull out of NAFTA, the repercussions on the Canadian economy could be significant, and the BoC will have to delay any plans to raise rates.

A Dizzying Day for Markets

Markets Rattled By Protectionist Trump

USD/CAD Fundamentals

Friday (March 2)

• Canadian GDP. Estimate 1.0%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 99.2
• 10:00 US Revised UoM Inflation Expectations

*All release times are GMT

*Key events are in bold

USD/CAD for Friday, March 2, 2018

USD/CAD, March 2 at 7:45 EST

Open: 1.2837 High: 1.2864 Low: 1.2820 Close: 1.2858

USD/CAD Technical

USD/CAD was flat in the Asian session and has edged higher in European trade

• 1.2757 is providing support
• 1.2865 is under pressure in resistance. It could break in the North American session
• Current range: 1.2757 to 1.2865

Further levels in both directions:

• Below: 1.2757, 1.2630, 1.2494 and 1.2351
• Above: 1.2865, 1.2920, 1.3014 and 1.31

OANDA’s Open Positions Ratio

USD/CAD ratio is showing strong movement towards short positions. Currently, short positions have a majority (63%), indicative of trader bias towards USD/CAD reversing directions and moving lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The US currency is weaker against all major pairs as US tariffs targeting China were announced. The USD was trading higher on Wednesday after the U.S. Federal Reserve hiked interest rates by 25 basis points as anticipated. Fed Chair Jerome Powell was neutral on his first press conference but the economic projections painted a strong US economy. The announcement on Thursday of Chinese imports subject to tariffs by the Trump administration drove stock markets lower and put downward pressure on the dollar. The economic calendar will have few major market moving events awaiting the easter holiday with the US final GDP estimate for Q4, the main attraction, to be released on Wednesday, March 28 at 8:30 am EDT. Canadian monthly GDP will be published on Thursday, March 29 at 8:30 am EDT.

• China prepared a list of tariffs on US products
• Final estimate of US GDP expected at 2.7 percent
• Canadian dollar rose as NAFTA optimism got a boost

US Fundamentals Lose Out to Trade War Concerns

The EUR/USD rose 0.64 percent during the week. The single currency is trading at 1.2367 after investors sold the dollar based on concerns about a possible trade war with China. European data was in short supply during the week with the German ZEW economic sentiment being the highlight. German confidence dropped in March as trade uncertainty had already soured the mood in Europe with ongoing Brexit negotiations and US tariffs discussed during the G20 meeting. European manufacturing also came in lower than forecasts on Thursdays when French and German flash PMIs were released. Fundamentals were strong in the US with durable goods surging to 3.1 percent on a 1.6 percent forecast and the Fed rate hike on Wednesday had the dollar appreciate versus majors.

Washington announced trade tariffs aimed at China on Thursday and with that investors repositioned their currency portfolio and headed to the safety of the Japanese Yen. The EUR gained as the USD sunk deeper as there are a lot of questions on why is the Trump administration so focused on engaging on a trade war. The Trump administration has been subject to high profile personnel changes and lack of stability in the White House has remained a red flag for currency traders.

The USD/CAD fell 1.82 percent in the last five days. The currency pair is trading at 1.2856. The Canadian dollar recovered from 9 month lows as positive news developed on the trade front. Canada was one of the first countries to be exempted from the Trump steel and aluminum tariffs and with the fall of the USD regained some of the ground lost last week. On Friday Canadian indicators showed a rise in annual inflation of 2.2 percent, a three year high. Retail sales still betray some softness in the economy as the headline number came in short at 0.3 percent of the 1.1 gain. Core retail sales met expectations of a 0.9 percent lift specially after last month’s drop of 1.7 percent.

The White House issued a statement on Friday that puts the steel and aluminum exemptions as conditions on reaching an agreement on the NAFTA renegotiations. President Trump has put in a deadline of May 1, and there is no significant progress on the negotiations the tariffs will become effective for Canada and Mexico. Originally all three members wanted a speedy resolution in 2017. The position of the US in trade negotiations was not flexible to the point that there has been little progress. Now this new deadline could finally bring about the momentum needed to unlock negotiations or spell the end of the 14 year old treaty.

The GBP/USD rose 1.45 percent during the week. Cable is trading at 1.4126 near a two month high after the Bank of England (BoE) held rates at 0.5 percent but signalled that a May rate hike might be in the cards. Brexit negotiations also helped with a transition deal being agreed between the UK and the EU. The 21 month transition period will be added to next year’s exit which leaves more room to negotiate a softer Brexit.

Two out of the nine policymakers in charge of British interest rates voted for higher rates. They were outvoted ultimately, but Ian McCafferty and Michael Saunders said that now is the time for lifting rates. Although sterling benefited from dollar weakness following trade war anxiety if a full blown trade dispute does emerge it will also affect the economic stability of the UK which could lead the BoE to reconsider a rate hike this year.

Market events to watch this week:

Tuesday, March 27
10:00am USD CB Consumer Confidence
8:00pm NZD ANZ Business Confidence
Wednesday, March 28
8:30am USD Final GDP q/q
10:30am USD Crude Oil Inventories
Thursday, March 29
4:30am GBP Current Account
8:30am CAD GDP m/m

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

The Canadian dollar continues to trade quietly on Thursday. In North American trade, USD/CAD is trading at 1.2902, down 0.18% on the day. On the release front, Canada GDP declined 0.1%, missing the estimate of +0.1%. There was more disappointing news on the inflation front, as the Raw Materials Price Index declined 0.3%, well below the estimate of a 2.8% gain. In the US, unemployment claims impressed, dropping to 215 thousand. This easily beat the estimate of 230 thousand. Consumer confidence also improved, as UoM Consumer Sentiment rose to 101.4, breaking past the 100-barrier for the first time since October. However, the indicator missed the estimate of 101.9 points.

The US economy continues to show strong expansion. Revised GDP for the third quarter came in at 2.9%, beating the estimate of 2.7%. This reading was revised upwards from the initial GDP estimate of 2.5%. Fourth quarter growth, although solid, could not keep up with a superb third quarter, which posted a gain of 3.2%. As for 2018, first quarter growth is expected to soften to 1.8%, but there is still a strong chance that the economy could hit 3% growth this year, as promised by US President Trump. The catalysts for such a rosy prediction are the massive tax cut and higher government spending. Where does this leave the Federal Reserve, which raised interest rates last week? Currently, the Fed is projecting to more rate hikes this year, but if the economy remains strong and inflation levels move closer to the Fed target of 2%, we could see four rate increases in 2018.

Negotiations over the NAFTA agreement continue, and positive statements from US negotiators have raised hopes that a new agreement will be reached between Canada, Mexico and the US. A key sticking point has been a US demand to increase the US content in vehicles made in NAFTA members, but the Trump administration has apparently backed down on this requirement. The gloomy air around the talks has improved, and there is cautious optimism that the sides can hammer out a new agreement in the next few weeks. A breakthrough in the talks would be bullish for the Canadian dollar, as NAFTA is a key component of the Canadian economy.

USD/CAD Fundamentals

 Thursday (March 29)

• 8:30 Canadian GDP. Estimate 0.1%. Actual -0.1%
• 8:30 Canadian RMPI. Estimate +2.8%. Actual -0.3%
• 8:30 Canadian IPPI. Estimate 0.4%. Actual 0.1%
• 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.2%
• 8:30 US Personal Spending. Estimate 0.2%. Actual 0.2%
• 8:30 US Unemployment Claims. Estimate 230K. Actual 215K
• 8:30 US Personal Income. Estimate 0.4%. Actual 0.4%
• 9:45 US Chicago PMI. Estimate 62.1. Actual 57.4
• 10:00 US Revised UoM Consumer Sentiment. Estimate 101.9. Actual 101.4
• 10:00 US Revised UoM Inflation Expectations. Actual 2.8%
• 10:30 US Natural Gas Storage. Estimate -75B. Actual -63B

*All release times are GMT

*Key events are in bold

USD/CAD for Thursday, March 29, 2018

USD/CAD, March 29 at 12:15 EST

Open: 1.2924 High: 1.2931 Low: 1.2902 Close: 1.2905

USD/CAD Technical

USD/CAD was flat in the Asian session. In European trade, the pair edged higher but then retracted. USD/CAD is showing limited movement in the North American session

• 1.2850 is providing support
• 1.2930 is a weak resistance line
• Current range: 1.2850 to 1.2930

Further levels in both directions:

• Below: 1.2850, 1.2757 and 1.2687
• Above: 1.2930, 1.3050, 1.3165 and 1.3260

OANDA’s Open Positions Ratio

USD/CAD ratio is showing limited movement this week. Currently, short positions have a majority (56%), indicative of USD/CAD continuing to move lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The Canadian dollar has lost ground in the Monday session, erasing the gains seen on Friday. Currently, USD/CAD is trading at 1.2873, up 0.34% on the day. In Canada, the focus is on inflation data. The Raw Materials Price Index is expected to rebound with a gain of 0.6%, while the Industrial Product Price Index is forecast to edge higher to 0.2%. In the US, Personal Spending is predicted to improve to 0.4%, while the markets are braced for Pending Homes to slip by 0.6%. On Tuesday, Canada releases GDP and BoC Governor speaks at an event in Yellowknife. In the US, the main event is ISM Manufacturing PMI.

The US released the first GDP report for the first quarter, with a respectable gain of 2.3% which beat the estimate of 2.0 percent. Still, this was a significant drop from GDP in the fourth quarter of 2018, which came in at 2.8 percent. Analysts also took note of the Employment Cost Index, which rose from 0.6% to 0.8%, another indication that inflation is moving higher. There is growing sentiment that the Federal Reserve will raise interest rates four times this year, although Fed policymakers continue to project a total of three increases in 2018. One scenario envisions the Fed raising rates once each quarter until the economy shows signs of slowing down. If inflation continues to move higher and economic conditions remain strong, the US dollar could continue to make headway against its Canadian counterpart.

Bank of Canada Governor Stephen Poloz testified on Parliament Hill last week and delivered a message of cautious optimism about economic conditions. Poloz said that he expected the economy to improve after a disappointing first quarter and projected that inflation would push above BoC’s target of 2% later in 2018. The bank maintained the benchmark rate at 1.25% at its April meeting but is expected to raise rates as early as May. However, policymakers would prefer to see the NAFTA negotiations concluded before making any rate moves. The talks have made significant progress, but the critical auto pact remains a stumbling block. It is likely that a tentative agreement will be hammered out, perhaps as early as May.

Is the US Dollar Finally Ready for Prime Time Again ?

Dollar Bulls Lack Conviction

USD/CAD Fundamentals

Monday (April 30)

• 8:30 Canadian RMPI. Estimate 0.6%
• 8:30 Canadian IPPI. Estimate 0.2%
• 8:30 US Core PCE Price Index. Estimate 0.2%
• 8:30 US Personal Spending. Estimate 0.4%
• 8:30 US Personal Income. Estimate 0.4%
• 9:45 US Chicago PMI. Estimate 58.2
• 10:00 US Pending Home Sales. Estimate 0.6%

Tuesday (May 1)

• 8:30 Canadian GDP. Estimate 0.3%
• 10:00 US ISM Manufacturing PMI. Estimate 58.6
• 14:30 Bank of Canada Governor Stephen Poloz Speaks

*All release times are DST

*Key events are in bold

USD/CAD for Monday, April 30, 2018

USD/CAD, April 30 at 7:40 DST

Open: 1.2829 High: 1.2872 Low: 1.2829 Close: 1.2873

USD/CAD Technical

USD/CAD inched higher in the Asian session and has posted stronger gains in European trade

• 1.2850 has switched to a support role after gains by USD/CAD on Monday
• 1.2943 is the next resistance line
• Current range: 1.2850 to 1.2943

Further levels in both directions:

• Below: 1.2850, 1.2757, 1.2687 and 1.2590
• Above: 1.2943, 1.3015 and 1.3125

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little movement in the Monday session. Currently, short positions have a majority (60%), indicative of slight trader bias towards USD/CAD reversing directions and moving downwards.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The Canadian dollar continues to trade quietly. In the Tuesday session, USD/CAD is trading at 1.2869, up 0.20% on the day. On the release front, Canada releases GDP, which is expected to rebound with a gain of 0.3%. Later in the day, Bank of Canada Governor will speak about household debt an event in Yellowknife. In the US, today’s key event is ISM Manufacturing PMI, which is expected to drop to 58.4 points. The focus will shift to US employment indicators in the latter part of the week, starting with ADP Nonfarm Employment Change on Wednesday. As well, the Federal Reserve will release a rate statement.

US President Trump has extended exemptions for steel and aluminum tariffs for Canada and Mexico for another 30 days. The exemptions come at a sensitive time, with the US, Canada and Mexico neck deep in negotiations over a new NAFTA trade agreement. The talks have made significant progress, but the critical auto pact remains a stumbling block. It is likely that a tentative agreement will be hammered out, perhaps later this month. The Bank of Canada has dropped strong hints that it plans to raise interest rates later this year, but policymakers would like the NAFTA issue to be resolved before the next rate hike.

The Federal Reserve will be on center stage on Wednesday when it concludes a 2-day policy meeting. The markets are expecting the Fed to maintain the benchmark rate at a range between 1.50% and 1.75%, and analysts will be keeping a close eye on the rate statement – a hawkish statement could propel the US dollar to higher levels. There is growing sentiment that the Federal Reserve will raise interest rates four times this year, although Fed policymakers have not changed their forecast of three increases in 2018. One scenario envisions the Fed raising rates once each quarter until the economy shows signs of slowing down. If inflation continues to move higher and economic conditions remain strong, the dollar should continue to perform well against its Canadian counterpart.

Shaky Shaky

U.S Dollar Shines Despite Labour Day Recognition

USD/CAD Fundamentals

Tuesday (May 1)

• 8:30 Canadian GDP. Estimate 0.3%
• 10:00 US ISM Manufacturing PMI. Estimate 58.6
• 10:00 Construction Spending. Estimate 0.5%
• 10:00 US ISM Manufacturing Prices. Estimate 78.3
• All Day – US Total Vehicle Sales. Estimate 17.1M
• 14:30 Bank of Canada Governor Stephen Poloz Speaks

Wednesday (May 2)

• 8:15 US ADP Nonfarm Employment Change. Estimate 200K
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate

*All release times are DST

*Key events are in bold

USD/CAD for Tuesday, May 1, 2018

USD/CAD, May 1 at 6:35 DST

Open: 1.2843 High: 1.2869 Low: 1.2820 Close: 1.2868

USD/CAD Technical

USD/CAD edged lower in the Asian session. The pair has reversed directions and has posted gains

• 1.2850 remains fluid and has switched to a resistance role after gains by USD/CAD on Tuesday.
• 1.2943 is the next resistance line
• Current range: 1.2850 to 1.2943

Further levels in both directions:

• Below: 1.2850, 1.2757, 1.2687 and 1.2590
• Above: 1.2943, 1.3015 and 1.3125

OANDA’s Open Positions Ratio

USD/CAD ratio is almost uchanged in the Tuesday session. Currently, short positions have a majority (61%), indicative of slight trader bias towards USD/CAD reversing directions and moving downwards.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The Canadian dollar continues to gain ground in the Thursday session, after posting sharp gains on Wednesday. In the North American session, USD/CAD is trading at 1.2845, down 0.24% on the day. On the release front, Canada’s GDP in March dropped to 0.3%, edging above the estimate of 0.2%. In the US, Personal Spending and PCE Price Index both beat their estimates. Unemployment claims dropped sharply to 221 thousand, beating the estimate of 228 thousand. On Friday, the focus will be on U.S employment data, with the release of nonfarm payrolls and wage growth.

It’s been an impressive turnaround for the Canadian dollar in mid-week, as the currency jumped 1.1% on Wednesday. The currency climbed on a positive view of the economy from the Bank of Canada. The bank statement noted that inflation was higher than expected and the export sector remained robust. As expected, the bank maintained the benchmark rate at 1.25 percent. Inflation has moved closer to the BoC target of 2 percent and economic growth has been steady, so the BoC will be giving serious consideration to a rate hike this summer. Some analysts are even predicting that the bank will raise rates twice in the second half of 2018.

The markets continue to keep a close eye on the “on-again off-again” summit between the U.S and North Korean leaders. President Trump and North Korean leader Kim Jong-un are scheduled to meet in Singapore on June 12, but curiously, neither side will confirm whether the meeting is on.  The White House has strongly hinted that the summit will take place, saying that the U.S continues to “actively prepare for President Trump’s expected summit with leader Kim in Singapore.” There is a flurry of activity around the summit – Trump has sent a team to Singapore and a senior North Korean official will meet with senior U.S officials on Wednesday. If Trump tweets out that the summit is on, investor sentiment could soar and boost the Canadian dollar.

  Conciliante

  Bank of Canada Holds Rates Steady

USD/CAD Fundamentals

Thursday (May 31)

• 7:30 US Challenger Job Cuts. Actual -4.8%
• 8:30 Canadian GDP. Estimate 0.2%. Actual 0.3%
• 8:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.2%
• 8:30 US Personal Spending. Estimate 0.4%. Actual 0.6%
• 8:30 US Unemployment Claims. Estimate 228K. Actual 221K
• 8:30 US Personal Income. Estimate 0.3%. Actual 0.3%
• 9:45 US Chicago PMI. Estimate 58.2
• 10:00 US Pending Home Sales. Estimate 0.4%
• 10:30 US Natural Gas Storage. Estimate 100B
• 11:00 US Crude Oil Inventories. Estimate -0.4M
• 12:45 US FOMC Member Rafael Bostic Speaks
• 13:00 US FOMC Member Lael Brainard Speaks

Friday (June 1)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 189K
• 8:30 US Unemployment Rate. Estimate 3.9%
• 10:00 US ISM Manufacturing PMI. Estimate 58.2

*All release times are DST

*Key events are in bold

USD/CAD for Thursday, May 31, 2018

USD/CAD, May 31 at 8:40 DST

Open: 1.2876 High: 1.2895 Low: 1.2818 Close: 1.2840

USD/CAD Technical

The Canadian dollar continues to break through support levels. USD/CAD ticked higher in the Asian session. The pair has posted losses in the European session

• 1.2757 is providing support
• 1.2850 is under pressure in resistance
• Current range: 1.2757 to 1.2850

Further levels in both directions:

• Below: 1.2850 and 1.2757, 1.2614 and 1.2544
• Above: 1.2850, 1.2943, 1.3015 and 1.3125

1. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The US dollar is mixed on Friday against major pairs. The US economy grew at a 4.1 percent pace on the second quarter according to the first estimate. The number came in right on the forecast which had no positive effect for the USD, but it did validate the U.S. Federal Reserve decision to keep a tighter monetary policy with two more rate hikes in the horizon this year. The week from July 30 to August 3 will be full to the brim featuring monetary policy announcements from the Bank of Japan (BOJ) the Fed, the Bank of England (BoE) and the release of jobs data in the United States.

• US Fed forecasted to stand pat on Wednesday
• Bank of England (BoE) expected to hike by 25 bps
• US could have added close to 200,000 jobs in July

EUR Falls on Dovish ECB and Political Tension

The EUR/USD lost 0.51 percent in the past five days. The single currency is trading at 1.1659 after the European Central Bank (ECB) did not provide any additional information at the end of its monetary policy meeting in July. The statement was almost a word for word recreation of the June document offering no insights for investors on when the central bank is willing to start lifting rates. The growing gap between US interest rates and European rates and an impressive growth rate in the second quarter in America gave the edge to the US dollar.

US President Trump said on Friday that the US will beat the current pace of growth going forward. The strong fundamental data will be vital for Republicans as they face midterm elections in the fall. Politics in Europe continue to add uncertainty as Italy’s Five Star founder once again is seeking a referendum on euro membership.

The U.S. Federal Reserve is not expected to announce any changes on Wednesday when it wrap up its August meeting. The next rate move is expected in September, which a more than 90 percent probability of a hike if inflation and growth continue in their current trends.

Loonie Rises on NAFTA Optimism

The USD/CAD lost 0.64 percent in the last week. The currency pair is trading at 1.3058 in a week that saw trade war concerns ease. The NAFTA and EU-US trade conversation both had positive sound bites this week. Incoming Mexican President was eager for a quick NAFTA renegotiation and he was echoed by the Trump administration. Canada and Mexico made sure to be clear that a trilateral negotiation is needed as the US has been pushing for two bilateral sit downs.

The loonie reached its higher level in six weeks on Wednesday amidst rising oil prices despite multiple evidence of ample supply. Disruptions in Saudi Arabia and the ongoing uncertainty with Iranian crude continue to push prices higher.

The main Canadian economic events during the week will be the release of the monthly GDP report on Tuesday and the Trade balance on Friday.

Yen Higher Ahead of Bank of Japan

The USD/JPY lost 0.43 percent in the last five trading sessions. The currency pair is trading at 110.95 ahead of the July 31 Bank of Japan (BOJ) policy meeting. The central bank has remained on the sidelines for most of the year and its most active contribution was to remove inflation targeting in April. The BOJ has in place an easing monetary policy that includes bond buying to keep 10 year bond yields under control.

There is a possibility that the BoJ will change the extreme form of its QE program on Tuesday, but it remains small given the lack of strong economic indicators out of Japan. Inflation continues to struggle and the economy contracted in the first quarter of 2018 so at this point it remains unlikely that the Bank of Japan would join the group of central banks who are scaling back their quantitive easing efforts.

GBP Awaiting BoE Rate Hike

The GBP/USD lost 0.08 percent during the week. The currency pair is trading at 1.3116 amid political tension due to Brexit with three consecutive weekly losses. The Brexit deal that was presented to the EU, a hard fought battle for Prime Minister Theresa May and for which hard core Brexiteers resigned, was knocked back by EU Brexit negotiator Michel Barnier. Key elements were rejected outright, even both parties still cling to an October deal.

The GBP lost despite heavy anticipation of a rate hike by the Bank of England (BoE) on super Thursday. The market is pricing in a 81 percent probability of a 25 basis points rate lift to 0.75 percent. Last meeting there were three dissenters that opposed holding rates. Despite a higher interest rate the comments from Bank of England Governor Mark Carney will be in focus as he could add a dovish tone as political uncertainty will surely make the job of protecting the UK economy harder.

Market events to watch this week:

Tuesday, July 31
10:00am USD CB Consumer Confidence
Wednesday, August1
4:30am GBP Manufacturing PMI
8:15am USD ADP Non-Farm Employment Change
10:00am USD ISM Manufacturing PMI
10:30am USD Crude Oil Inventories
2:00pm USD FOMC Statement
2:00pmUSD Federal Funds Rate
Thursday, August2
4:30am GBP Construction PMI
7:00am GBP BOE Inflation Report
7:00am GBP MPC Official Bank Rate Votes
7:00am GBP Monetary Policy Summary
7:00am GBP Official Bank Rate
7:30am GBP BOE Gov Carney Speaks
Friday, August3
4:30am GBP Services PMI
8:30am USD Average Hourly Earnings m/m
8:30am USD Non-Farm Employment Change
8:30am USD Unemployment Rate
10:00am USD ISM Non-Manufacturing PMI

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

The US dollar fell on Friday after the U.S. non farm payrolls (NFP) came in below expectations with only a gain of 157,000 but otherwise the unemployment rate dropped to 3.9 percent and wage growth remained unchanged at 0.3 percent. The greenback is still higher against most majors on a weekly basis. The past five trading days featured central banks and influential economic indicators, but the guiding factor remains the trade tensions between China and the United States. On Friday China announced its preparing new tariffs on $60 billion US goods as retaliation on the ongoing trade spat. The week that kicks off on August 6 will be more subdued from the economic calendar with the central banks of Australia and New Zealand publishing their officials rates. The UK’s gross domestic product, Canadian jobs data and US inflation will wrap up the week on Friday, August 10.

• RBA and RBNZ expected to keep rates unchanged
• UK quarterly GDP forecasted to gain 0.4 percent
• US inflation advancing at 0.2 percent

Dollar Rises Guided by Geopolitics

The EUR/USD lost 0.61 percent in the last five days. The single currency is trading at 1.1582 after the EUR rose 0.10 percent on Friday but is far from recouping the gains of the USD during the week. The euro rose on a tight rangebound session despite overcoming weak retail sales and was helped by the lower than expected jobs report. The currency pair was mostly guided by geopolitics and the U.S. Federal Reserve meeting on Wednesday. Trade tensions have escalated on the US-China front with the US central bank staying put on rates, but giving an optimistic view on the economy.

The US central bank is expected to continue with its plans to lift interest rates two more times in 2018. The jobs report brought less jobs than expected but still managed to add enough jobs to bring the unemployment rate down to 3.9 percent. There are concerns that the employment numbers will take a hit as trade war decisions trickle down but for now the outlook for American jobs is solid.

Inflation pressures remains low as despite a lower unemployment and high participation rate wages have not caught up to other costs. Labour shortages have not been widespread enough to trigger an above inflation rise in pay.

The positive employment data and the impressive growth of the economy in the second quarter validate the Fed’s decision to raise rates twice so far in 2018 and to continue on the path for two more rate hikes. The CME FedWatch tool shows a 93.6 percent of a chance of a hike in September 26.

The week of August 6 to August 10 will not bring the same economic calendar fireworks compared to the first week of the month. The highlights will be the Reserve Bank of New Zealand (RBNZ) and the Reserve Bank of Australia (RBA) with rate announcements that will likely end up with no change leaving investors to look for words from central bankers and monetary policy language for guidance.

The consumer price index on Friday will shed more light on inflation in America.

BoE Dovish Hike Sinks Pound

The GBP/USD fell 0.79 percent during the week. Cable is trading at 1.3004 wit the pound rising slightly on Friday. The Bank of England (BoE) hiked its benchmark rate on Super Thursday, but it was the cautionary words of BoE Governor Mark Carney that ultimately took the currency lower. The actions of the central bank were hawkish, by delivering the second rate hikes since the crisis, but Brexit looms over the monetary policy decision as hard Brexit scenarios have increased in probability.

The decision of the Bank of England (BoE) was unanimous, but given the fragile state of Prime Minister May’s leadership as she heads into the final 8 months of Brexit negotiations, it could end up being the only pro-active decision by the central bank in 2018 as it heads into reactive territory.

Loonie Higher on Strong Data and NAFTA Hope

The USD/CAD lost 0.58 percent during the week. The currency pair is trading at 1.2983 after strong Canadian trade data added more arguments for a Bank of Canada (BoC) rate hike. Canada’s deficit shrunk to $626 million in June. The monthly GDP numbers released on Tuesday by beating estimates with a 0.5 percent gain.

The Bank of Canada (BoC) lifted interest rates by 25 basis points on July 11 and a strong GDP report and a narrower trade deficit the probability of a follow up in 2018 has risen. Bank of Nova Scotia is forecasting 2 more rate hikes despite the uncertain outcome on NAFTA. The BoC will try to keep the gap between the Fed funds rate and the Canadian rate as much as the economy will allow. The U.S. Federal Reserve is expected to hike in September and again in December to deliver the promised four interest rate hikes in their path to normalization.

Mexican Peso Rose as US Jobs Missed Expectations

The USD/MXN depreciated on a weekly basis and is trading at 18.5574 on Friday afternoon. The currency pair had a volatile week trading in a tight range. The highest point came as trade fears triggered a flight to safety in which investors bought dollars. The talks on Thursday and Friday between US and Mexican negotiators are keeping NAFTA hope alive and with he soft employment numbers in the US the MXN appreciated.

NAFTA negotiations have advanced in recent weeks as the newly elected Mexican president has been optimistic a quick deal can be reached. Mexican Trade teams are in Washington to talk with the US Trade representative, but the US did not extend an invitation to Canada to join the meetings.

The US team is sticking to the sunset cause and the auto content but there is more willingness to negotiate in bilateral terms, although Mexico has made it clear that it won’t negotiate without Canada being present.

Market events to watch this week:

Tuesday, August 7
12:30am AUD RBA Rate Statement
11:00pm NZD Inflation Expectations q/q
11:05pm AUD RBA Gov Lowe Speaks
Wednesday, August 8
10:30am USD Crude Oil Inventories
5:00pm NZD Official Cash Rate
6:00pm NZD RBNZ Press Conference
Thursday, August 9
8:30am USD PPI m/m
9:30pm AUD RBA Monetary Policy Statement
Friday, August 10
4:30am GBP GDP m/m
4:30am GBP Manufacturing Production m/m
4:30am BP Prelim GDP q/q
8:30am CAD Employment Change
8:30am CAD Unemployment Rate
8:30am USD CPI m/m
8:30am USD Core CPI m/m

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar