The Canadian dollar continues has steadied on Wednesday, after posting losses for a six straight day. In the North American session, USD/CAD is trading at 12974, down 0.% on the day. On the release front, it’s a busy day on both sides of the border. In the US, Preliminary GDP came in at 2.2%, just shy of 2.3%. ADP nonfarm payrolls dropped sharply to 178 thousand, well off the estimate of 191 thousand. In Canada, the current account deficit jumped to C$19.5 billion, above the estimate of C$18.1 billion. The Raw Materials Price Index dropped to 0.7%, well below the forecast of 2.1%. All eyes are on the Bank of Canada, which is expected to stay on the sidelines and hold the benchmark rate at 1.25%. On Thursday, Canada will release GDP and the US publishes Personal Spending and unemployment claims.
The Canadian dollar remains under pressure this week. The currency has declined 1.4 percent in the month of May and dropped to a 2-month low on Tuesday. There could be further headwinds for the dollar on Wednesday, if, as expected, the Bank of Canada holds interest rates at 1.25 percent. Inflation has moved closer to the BoC target of 2 percent and economic growth has been steady, so the bank may opt for the sidelines when policymakers meet on Wednesday. However, with the Federal Reserve widely expected to raise rates next month, the Canadian dollar will be less attractive to investors. Meanwhile, the growing political crisis in Italy has unnerved investors, which could hurt minor currencies like the Canadian dollar, which tends to lose ground when risk appetite is weak.
Investors are also keeping a close eye on the on-again off-again summit between the U.S and North Korean leaders. President Trump and North Korean leader Kim Jong-un are scheduled to meet in Singapore on June 12, but curiously, neither side will confirm whether the meeting is on. Last week, Trump sent a letter to Kim, saying that Trump was canceling the much-anticipated meeting. However, the White House has since sent a team to Singapore and a senior North Korean official is on his way to Washington to meet with Secretary of State Mike Pompeo. If there is confirmation that the meeting is on, investor risk appetite could rise and push the Canadian dollar to higher ground.
