USD/CAD has posted considerable gains in the Friday session. Currently, the pair is trading at 1.3558, up 0.43% on the day. On the release front, there are key events on both sides of the border. Canadian GDP is expected to rebound in March, with a gain of 0.4%, after a decline of 0.1%. The Raw Materials Price Index is expected to slow to 2.3%. In the U.S., consumer data also in the spotlight. The Federal Reserve’s preferred inflation gauge, Core PCE Price Index, is expected to improve to 0.2%. However, personal spending is projected to slow to o.2%, after a strong gain of 0.9% in the previous release. Traders should be prepared for further movement from the pair in the North American session.
The Canadian dollar is sensitive to trade risks, and has lost ground on Friday after President Trump threatened to slap tariffs on all Mexican products, due to the illegal immigration problem. Although Trump said that tariffs would be set at just 5%, risk appetite has fallen, sending the Canadian dollar lower. There was more negative news out of China, as manufacturing PMI dipped into contraction territory, with a reading of 49.4, shy of the estimate of 49.9 points. The Chinese economy has been hit hard by the trade war with the U.S., which has weakened global demand. This, in turn, has hurt export-reliant economies such as Canada, and has weighed on the Canadian dollar.
Which way is the Canadian dollar headed? There are factors which could support a move in either direction. The labor market has improved, and created a record number of jobs in April. Consumer spending, a key driver of economic growth, also remains strong. On the negative side, trade tensions between the U.S. and China have soared, which has hurt risk appetite towards minor currencies like the Canadian dollar. As well, oil prices have fallen, which has weighed on the Canadian currency.
