USD/CAD – Canadian dollar halts slide, U.S consumer inflation remains soft

Jul 12 12:07 2018 Print This Article

The Canadian dollar has posted gains in the Thursday session. Currently, USD/CAD is trading at 1.3152, down 0.43% on the day. In the U.S, the focus is on inflation reports. CPI edged down to 0.1%, shy of the forecast of 0.2%. Core CPI remained steady at 0.2%, matching the forecast. Unemployment claims dropped to 214 thousand, easily beating the estimate of 226 thousand. In Canada, the New Housing Price Index remained pegged at 0.0%, short of the estimate of 0.1%. The indicator has not posted a gain since November. On Friday, the U.S releases the UoM Consumer Sentiment report.

The Bank of Canada has been hinting for weeks that a rate hike was coming, and made good on this promise on Wednesday. The Bank raised rates by a quarter-point, bringing the benchmark rate to 1.50%. This is the highest level since December 2008. The Bank followed up with a hawkish rate statement, as policymakers noted that the economy continues to operate close to capacity. The BoC has upwardly revised its growth forecast for Q2 from 2.5% to 2.8%, and projected inflation to climb to 2.5%, before falling to 2% in the second half of 2019. As for the escalating trade war, the BoC said that U.S tariffs on steel and aluminum and retaliatory tariffs by Canada would lower economic growth. However, the effect of the tariffs would be modest, due to strong global demand and high commodity prices. Despite the rate hike and hawkish comments from the BoC, the Canadian dollar lost ground against the greenback on Wednesday.

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