The Canadian dollar is trading sideways in the Monday session. Currently, USD/CAD is trading at 1.2891, down 0.04% on the day. On the release front, there are no data releases in Canada or the US. We’ll hear from three FOMC members – William Dudley, Loretta Mester, Randal Quarles. On Tuesday, the key event of the day is US CB Consumer Confidence.
Canadian consumer data was positive on Friday, helping propel the Canadian dollar to gains of 1.6% last week. CPI, ticked lower to 0.6% but beat the estimate of 0.4%. Retail Sales rebounded with a gain of 0.9%, after a sharp loss of 1.8% in the previous release. This reading matched the estimate. There was good news south of the border, as Core Durable Goods Orders rebounded with a strong gain of 1.2%, crushing the estimate of 0.5%. This marked the strongest gain since July 2016. Durable Goods Orders jumped to an 8-month high, with a gain of 3.1%. The reading easily beat the forecast of 1.6%. The US manufacturing sector continues to expand at an impressive clip, a result of stronger global growth and a cheaper US dollar, which makes US goods less expensive for foreign buyers.
Canada is heavily dependent on exports, so the specter of a global trade war could be disastrous for the Canadian economy. There is considerable worry in Ottawa, as US President Trump seems intent on “righting wrongs” in US trade balances by applying the hedge hammer of tariffs. On Thursday, US President Trump slapped 25% tariffs on up to $60 billion worth of Chinese imports on Thursday. For its part, China wasted no time in threatening to retaliate, saying it was planning to impose tariffs on 128 US products, which amounted to $3 billion in imports. The tariffs directed against China come on the heels of tariffs on steel imports coming into the US, although the US has exempted Canada and some other countries. There is serious concern that these moves could lead to a downturn in the Chinese economy and cause a global recession, a nightmarish scenario for Canadian policymakers.
