USD/CAD continues to gain ground this week. In the Tuesday session, the pair has reached a high of 1.3447, its highest level since March 15. On the release front, Canada and the US will both release Trade Balance. Canada’s trade surplus is expected to edge lower to C$0.7 billion. In the US, the trade deficit is forecast to narrow to $46.0 billion.
Canada’s GDP expanded 0.6 percent, above the forecast of 0.3 percent. This marked a 7-month high for GDP, and raises hopes that a strong US economy will boost its northern neighbor. Although the Canadian economy has been churning out decent numbers, lower oil prices have had a negative impact on the Canadian economy and also weighed on the Canadian dollar, which continues to lose ground. Later in the week, we’ll get a look at Canadian Employment Change, which is expected to post a modest gain of 5.7 thousand.
The US economy hasn’t missed a beat in 2017, and the markets are expecting strong data for the first quarter. The CB consumer confidence report soared to 125.6 in March, and strong consumer confidence levels should translate into increased consumer spending, a key component of economic growth. GDP for the fourth quarter was revised to 2.1%, up from 1.9% in the previous GDP report. With the economy headed in the right direction, the discussions around the monetary policy tables are not whether the Fed will raise rates, but will it press the rate trigger two or three more times in 2017. The markets will be paying close attention to the minutes of the March meeting, when the Fed raised rates by a quarter-point, to a range of 0.75-1.00%. Any hints about the timing of the next hike, as well as the tone of the minutes are factors which could move the currency markets on Wednesday. The markets considered the rate statement overly cautious, and this sentiment sent the US dollar broadly lower. If the reaction to the minutes is one of disappointment, the dollar could again head downwards.
