USD/CAD is almost unchanged in the Monday session. Currently, the pair is trading slightly above the 1.31 line. On the release front, there are no Canadian releases. On the economic front, US Core Durable Goods Orders declined 0.2%, short of the estimate of +0.5%. However, Durable Goods Orders jumped 1.8%, beating the forecast of 1.6%. Later in the day, the US releases Pending Home Sales. On Tuesday, the US publishes Preliminary GDP and CB Consumer Confidence. As well, President Trump will address a joint session of Congress.
Canadian inflation levels jumped in January, led by CPI, which climbed 0.9%, well above the forecast of 0.3%. Higher gasoline prices and stronger crude prices boosted inflation. 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%. On Tuesday, Canada releases RMPI, which gauges inflation in the manufacturing sector.
US data was soft on Friday. Revised UoM Consumer Sentiment dropped to 96.3 in February, compared to 98.5 a month earlier. Still, this figure edged above the forecast of 96.1. On the housing sector, New Home Sales improved to 555 thousand in January, but this was well short of the forecast of 575 thousand. This follows Existing Home Sales, which jumped to 5.69 million, above the estimate of 5.55 million. On Monday, we’ll get a look at Pending Home Sales, which is expected to dip to 1.1%.
President Trump’s administration has a rough first month, beset by constant friction with the media and trouble filling in key cabinet positions. Trump will address Congress on Tuesday and the nation will be listening closely. Will we see the combative, outspoken Trump, or will he opt for a more conciliatory approach? In order to pass key legislation, Trump will have to make nice with lawmakers from both sides of the fence, and this speech would be an ideal time to offer a hand of cooperation rather than combat. The markets will be looking for some details about the administration’s economic plan – if this is lacking, market sentiment could sour, dragging down the US dollar.
