USD/CAD has posted slight losses and is under pressure in the Tuesday session. Early in North American session, the pair is trading slightly above the 1.32 level. On the release front, Canadian RMPI, which measures manufacturing inflation, dropped to 1.7%, but this beat the estimate of 1.3%. In the US, revised GDP remained unchanged at 1.9%, shy of the forecast of 2.1%. Next is CB Consumer Confidence, which is expected to drop to 111.3 points. As well, President Donald Trump will address a joint session of Congress.
Canadian inflation levels were unexpectedly strong in January, as higher gasoline and crude prices boosted inflation. CPI, climbed 0.9%, and RMPI rose 1.7%, as both indicators beat expectations. Still, the unexpected rise in inflation is unlikely to sway any opinions at the Bank of Canada, which is expected to hold rates at 0.50% at its policy meeting on Wednesday. Last year, the BoC adopted three new indicators to measure inflation, and these averaged 1.6% in January, below the central bank’s inflation target of 2.0%. So, the central bank is in no rush to raise interest rates for now.
President Trump delivers his first speech before Congress on Tuesday, and the speech could have huge ramifications for the financial markets. Since Trump’s election win, the stock markets are sharply higher, but the markets will be expecting some details about Trump’s economic agenda. Trump recently promised to unveil a "phenomenal" tax reform package and significant spending on infrastructure, but hasn’t provided any details. Tuesday’s speech marks a critical opportunity for the new administration, which is still trying to find its bearings after a rocky first month. If Trump fails to present specifics in terms of numbers or at least some timelines, market sentiment will likely sour and this could hurt the US dollar.
