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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.
The Canadian dollar experienced significant losses early in the week against the US dollar, following Tuesday’s lower-than-expected Canadian GDP figures and Federal Reserve Chairman Powell’s hawkish remarks on inflation progress on Wednesday. These events prompted some investors to speculate about the possibility of further rate hikes by the Fed, highlighting the potential major divergence in monetary policy and interest rate directions between the Bank of Canada and the Federal Reserve.
The Canadian dollar briefly touched its weakest level since April 19, falling to 1.3760 on Tuesday following the release of weaker-than-expected GDP numbers. Canada’s gross domestic product (GDP) increased by 0.2 percent in February, according to Statistics Canada, falling short of analyst estimates of 0.3 percent.
If you’re like us, you haven’t seen the inside of a retail store in months, and the Canadian dollar took a hit because of it. The Canadian dollar gave up about ½ cent against the US dollar due to weaker-than-expected retail sales in Canada. Retail numbers dropped 0.1% in February compared to the previous month. After the news, markets increased their bet that the Bank of Canada will start cutting interest rates in June to 55%, up from 50% before the report. While this is probably not the straw that breaks the camel’s back, it is yet another indication of a weakening Canadian economy and a depressed Canadian consumer.
After sinking two full cents against the US dollar last week, the Canadian dollar had gained back about half a penny in early Monday morning trading. Global markets in general are taking a breather after a statement from Iran indicated that military action has ‘concluded’. While markets are still expecting an Israeli response, for the time being, it is not a pressing concern.
The Canadian Dollar had another volatile day on Friday. The USD/CAD saw significant gains against the USD on Thursday, touching 1.3480, after Fed Chairman Powell suggested that the Fed still anticipates cutting rates this year despite the strong US economy. Then, on Friday morning, the combination of a spectacular US employment report and a weak Canadian employment report sent the Canadian dollar on a nosedive versus the US Dollar, dropping all the way down to the 1.3640 mark.
Since late December of last year, the Canadian dollar has been trading in a tight range between approximal 1.34 to 1.36 versus the US dollar. The USD/CAD currency pair has attempted numerous times to push past the 1.36 range, but it has failed to do so in a sustained manner. There are a couple of reasons why the USD/CAD pair has been trading in a tight range.
