TheÂ Canadian dollar posted mild gains against its American counterpart onÂ Monday asÂ theÂ loonie climbed above 76 cents forÂ theÂ first time inÂ aÂ week. While theÂ loonie will try toÂ find direction from theÂ US dollar, investors will also concentrate onÂ several key economic events this week.
TheÂ CAD/USD currency pair rose 0.16% from anÂ opening ofÂ 0.7599 toÂ 0.7611 atÂ 20:30 GMT. TheÂ USD/CAD currency pair tumbled 0.11% from anÂ opening ofÂ 1.3158 toÂ 1.3143.
OnÂ Friday, theÂ Canadian consumer price index (CPI) andÂ retail sales data reports will be released. Early forecasts suggest that retail sales will be flat inÂ June andÂ theÂ CPI will jump 2.5%. Both policymakers andÂ traders are expected toÂ comb through theÂ figures asÂ theÂ Bank ofÂ Canada (BOC) confirmed last week that future increases toÂ interest rates are data-dependent.
Should these reports beat market anticipations, then it could lift theÂ Canadian dollar andÂ increase theÂ chances ofÂ theÂ central bank pulling theÂ trigger onÂ aÂ September rate hike.
Analysts are not expecting toÂ find currency support from theÂ North American Free Trade Agreement (NAFTA). InÂ addition toÂ theÂ recent Mexican election results, US trade negotiators do not appear toÂ be inÂ any hurry toÂ agree toÂ aÂ new deal, especially asÂ administration officials engage inÂ trade spats with China. TheÂ level ofÂ uncertainty surrounding NAFTA talks has BOC Governor Stephen Poloz sounding theÂ alarm, warning that theÂ loonie was “aÂ little bit soft” last month based onÂ “investment sentiment andÂ sentiment around trade.”
Meanwhile, Ottawa andÂ Washington are engaged inÂ aÂ tit-for-tat trade war. Earlier this month, theÂ Canadian government imposed its retaliatory tariffs onÂ $16.6 billion worth ofÂ US goods, leaving theÂ White House threatening toÂ retaliate toÂ theÂ retaliation. Prime Minister Justin Trudeau andÂ his Cabinet have confirmed that they will respond toÂ any import levy with their own series ofÂ taxes.
Since theÂ Canadian dollar has not made gains from higher oil prices, theÂ loonie will attempt toÂ establish aÂ short-term trading pattern based onÂ theÂ greenback.
President Donald Trump met with Russian President Vladimir Putin onÂ Monday. TheÂ leaders vowed toÂ improve US-Russia relations andÂ try toÂ find middle ground inÂ aÂ wide array ofÂ disputes, from Ukraine toÂ NATO. ToÂ celebrate theÂ three-nation 2026 FIFA World Cup, President Putin gave Trump aÂ World Cup soccer ball, telling him that “now theÂ ball is inÂ your court.”
Federal Reserve Chair Jerome Powell will deliver his semi-annual testimony onÂ Capitol Hill this week. Observers will wait toÂ see if Powell offers any hints asÂ toÂ how serious theÂ central bank is about raising rates two more times inÂ 2018. So far, Powell andÂ other members ofÂ theÂ Federal Open Market Committee (FOMC) have expressed optimism about theÂ national economy andÂ its outlook, leading many toÂ believe more rate hikes are coming.
Also, theÂ US government published positive economic data onÂ Monday. US business inventories advanced 0.4% inÂ May, while retail sales surged 1.4%, finding theÂ biggest gains inÂ theÂ auto sector (0.8%), service stations (1%), andÂ ecommerce (1.3%).
TheÂ US dollar still slipped toÂ kick off theÂ trading week, sliding 0.26% toÂ 94.49.
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