The Canadian dollar is unchanged in the Tuesday session. Currently, USD/CAD is trading at 1.2655, up 0.06% on the day. On the release front, there are no Canadian events. The US will release the Richmond Manufacturing Index, which is expected to edge lower to 17 points. On Wednesday, the Bank of Canada will set the benchmark rate. The US will release Core Durable Goods Orders and New Home Sales.
The Canadian dollar continues to struggle. The currency lost 1.3% last week against the greenback, and is currently at its lowest level since mid-August. There was no relief from Canadian data on Monday, as Wholesale Sales slowed to 0.5% in August, well off the forecast of 1.1%. Investors are keeping a close eye on the BoC, which will release a rate statement and its quarterly monetary policy report.
Canadian numbers disappointed on Friday, weighing on the Canadian dollar. Core Retail Sales slumped with a decline of 0.7% in August. This marked the indicator’s steepest decline since June 2016. Inflation remains weak, as CPI inched up to 0.2%, shy of the estimate of 0.3%. These numbers have bolstered the likelihood that the Bank of Canada will keep interest rates steady at 1.00%. The Bank surprised the markets with a 25-basis point hike in September, in response to a Canadian economy that performed will in the first half of the year. This helped push the Canadian dollar higher, but the currency has since given up these gains.
Will Janet Yellen bid adieu to the Federal Reserve? Yellen’s 3-year term concludes in February 2018, and President Trump has said he will nominate a new Fed in the next few days. The front runners are economist John Taylor and Federal Reserve Governor Jerome Powell. Taylor advocates a rule in which rates which be as high as 3 percent, given current economic conditions. Powell is more closely aligned to Fed Chair Janet Yellen’s monetary stance which advocates an incremental increase in rates. With the two candidates representing sharply differing views on interest rate levels, Trump’s choice for the new Fed chair could have a significant effect on monetary policy and the strength of the US dollar.
