The Canadian Dollar has had an interesting week and has shown surprising resilience against a broadly stronger US Dollar as of late. Heading into the Canada Day long weekend, we…
With a light week in terms of economic data, the Canadian dollar has been treading water for the first few days of this week, trading between 1.3690 and 1.3790 versus the US dollar. However, the latter half of the week includes the Bank of Canada’s (BoC) latest Summary of Deliberations, slated to be released on Wednesday, as well as Canadian Retail Sales coming out on Friday.
Wednesday morning’s US inflation report, the consumer price index (CPI), indicated that inflation rose by 3.3% annually last month, while core prices climbed by 3.4%. This marks the smallest year-over-year increase since 2021. The cooling inflation could boost the likelihood of the Federal Reserve cutting interest rates later this year, especially as the Fed concludes its policy meeting today.
With global political uncertainty abound after the surprising EU Parliament elections, which saw far-right parties gaining across most European nations, financial markets are taking a risk-off approach this morning. The most notable results were in France, where President Macron called a snap election for the end of June in what is being described as an all-or-nothing gamble.
The Canadian dollar is drifting within a narrow range against the USD during Monday’s trading session. Markets are looking past weaker-than-expected manufacturing numbers published on Monday from both north and south of the border as they focus on the Bank of Canada’s interest rate announcement on Wednesday, June 5th.
Despite a strong rebound on Friday, the Canadian dollar was lower against most major currencies for the week. The USD/CAD pair traded as high as 1.3745 early in the week before pulling back to the mid-1.36 range on Friday. The Canadian dollar’s strength came despite the release of weaker-than-expected retail sales numbers in Canada.
The USD/CAD currency pair is slightly higher in early afternoon trading on Wednesday as markets nervously await the release of the Federal Open Market Committee (FOMC) minutes later in the day. Markets are looking to the release of the FOMC minutes to possibly shed light on when the Fed will feel confident enough to shift into its rate reduction cycle. Currently, markets are anticipating a rate cut in September or November of this year.
Heading into the Victoria Day long weekend, the Canadian dollar is sitting pretty. It has gained 1.5 cents this month against the US dollar, following an explosive jobs report last Friday and weaker-than-expected economic data from the US. Just as recently as two weeks ago, economists were floating the idea that the BoC could be cutting rates at the same time as the Fed was increasing interest rates. This would have been the definition of a disastrous situation for the Canadian dollar.