After an uneventful week, USD/CAD is showing little movement in the Monday session. Early in North American trade, the pair is trading just above the 1.31 level. On the release front, US markets are closed for Presidents’ Day, so traders can expect a quiet day from USD/CAD. In Canada, Wholesale Sales jumped 0.7% in December, above the estimate of 0.4%.
With Fed Chair Janet Yellen’s giving the US economy a thumbs-up last week, the markets are keen to review the Fed policy minutes, which will be released on Wednesday. Testifying before Congress last week, Yellen noted that inflation is moving towards the Fed’s 2 percent target, the labor market remains red-hot and consumer spending is strong. Yellen strongly hinted that a rate hike was imminent, leaving the markets to speculate if the Fed prefers to make a move in March or June. If the US economy stays on track in 2017, analysts expect two or three rate hikes of a quarter-point. At the same time, the Fed wants to take into account the economic stance of the new administration, but this remains an elusive goal. Donald Trump continues to have difficulty filling in key cabinet positions and the media continues to probe connections between Trump officials and Russia. Trump has fired back by bitterly attacking the media, and lost in the mayhem is a clear and coherent economic policy. Although Trump has been in office for just over a month, the perception of a muddled and disoriented White House is creating uncertainty in the markets, and is, as Trump would say, "bad for business".
The US economy continues to perform well, as underscored by sharp economic data on Thursday. Unemployment claims were slightly higher at 239 thousand, but beat the forecast of 245 thousand. On the manufacturing front, the Philly Fed Manufacturing Index soared to 43.3 points, crushing the estimate of 18.5 points. This marked its highest level since 2011. Earlier in the week, the Empire State Manufacturing Index also climbed sharply, with a reading of 18.7, compared to the forecast of 7.2 points. The surprisingly strong data is welcome news from the manufacturing sector, which like other industrialized countries, has been battered by globalization. President Trump has promised to bring manufacturing jobs back to the US and invigorate the struggling sector. There was more good news from the inflation front, as PPI and CPI posted respectable gains of 0.6% in January, above their estimates.
