The Canadian dollar has posted slight gains in the Friday session. Currently, USD/CAD is trading at 1.3240, down 0.22% on the day. On the release front, the focus is on consumer indicators. CPI is expected to remain pegged at 0.1%, while retail sales are expected at 0.6%, which would be the first gain in 2018. Traders should be prepared for movement from the Canadian dollar in the North American session. There are no US indicators on the schedule.
Bank of Canada policymakers will be keeping a close eye on Friday’s retail sales and inflation data. The Bank raised interest rates last month and said that further hikes could be on the way. An additional rate hike will be dependent on the strength of key indicators, as well as the fact that the Federal Reserve is likely to raise rates in September and perhaps December as well. With the Canadian dollar trading close to 13-month lows, BoC policymakers will have to raise rates or risk having the Canadian currency lose more ground due to interest rate differential with the United States.
The tariff slugfest between the U.S and its major trading partners has raised serious concerns not just with investors, but with Federal Reserve policymakers as well. The Federal Reserve Beige Book for July, released on Wednesday, was rife with references to ‘tariffs’. This trend started in the April Beige Book after President Trump threatened in March to impose tariffs on China. Most of the twelve Fed regional districts referred to tariffs in their individual reports, which make up the Beige Book. Some Fed policymakers have also voiced their concern over the impact that tariffs could have on the U.S economy and is an issue the Fed will have to take into consideration, as it mulls over rate policy for the next six months.
