USD/CAD – Canadian dollar higher as GDP, Inflation Beat Estimates

The Canadian dollar has jumped in Friday’s North American session. Currently, USD/CAD is trading at 1.3164, down 0.67% on the day. On the release front, Canada’s GDP posted a 0.1% gain, above the estimate of 0.0%. On the inflation front, the Raw Materials Price Index jumped 3.8%, crushing the estimate to climb to 1.2%. In the US, Core PCE Price Index remained at 0.2% for a fourth straight month and matched the forecast. Personal Spending dropped to 0.2%, shy of the forecast of 0.4%. UoM Consumer Confidence edged up to 98.2, short of the forecast of 99.1 points. 

Investors are keeping a close eye on the Bank of Canada, which holds a policy meeting on July 11. The bank has strongly hinted that a rate hike could be coming soon. On Wednesday, BoC Governor Stephen Poloz had a hawkish message for the markets, noting that inflation was on target and the domestic economy was performing well. However, Poloz also mentioned that the trade war between Canada and the U.S was hurting business investment. Currently, the likelihood of a rate hike in July is 55 percent. Canadian economic data in the next two weeks will likely be the determining factor as to whether the BoC presses the rate trigger, or opts to wait until later in the year.

The tariff showdown between the U.S and its major trading partners continues, and the crisis could affect U.S monetary policy. Currently, the Federal Reserve plans to raise rates four times in 2018 (up from three), but a global trade war could force the Fed to revise its forecast down to three hikes. There is a split among Fed policymakers with regard to the number of rate hikes in the second half of 2018. Earlier in the week,  Atlanta Fed bank president Raphael Bostic said that if the trade war intensified, he would vote against a fourth rate hike, due to downside risks to the economy. Fed Chair Jerome Powell sounded pessimistic about the economic effects of trade tensions at an ECB forum earlier in June, and if other Fed members express similar concerns, the Fed could delay a fourth hike until 2019.

USD/CAD Fundamentals

Friday (June 29)

• 8:30 Canadian GDP. Estimate 0.0%. Actual 0.1%
• 8:30 Canadian Raw Materials Price Index. Estimate 1.2%. Actual 3.8%
• 8:30 Canadian Industrial Product Price Index. Estimate 0.9%. Actual 1.0%
• 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.2%
• 8:30 US Core Personal Spending. Estimate 0.4%. Actual 0.2%
• 8:30 Chicago PMI. Estimate 60.1. Actual 64.1
• 10:00 US Revised UoM Consumer Sentiment. Estimate 99.1. Actual 98.2
• 10:00 UoM Revised UoM Inflation Expectations. Actual 3.0%

*All release times are DST

*Key events are in bold

USD/CAD for Friday, June 29, 2018

USD/CAD, June 29 at 10:35 DST

Open: 1.3252 High: 1.3269 Low: 1.3161 Close: 1.3164

USD/CAD Technical

USD/CAD edged lower in the Asian session but recovered in European trade

• 1.3160 is under pressure in support. It could break in the North American session
• 1.3292 is the next resistance line
• Current range: 1.3160 to 1.3292

Further levels in both directions:

• Below: 1.3160, 1.3067 and 1.2970
• Above: 1.3292, 1.3436, 1.3530 and 1.3637

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