Treading a bullish channel in the second half of the month, the North American dollar pair has the US dollar advancing over its Canadian counterpart to commence this week’s currency exchanges. The USDCAD has appreciated after the Bank of Canada stated that the need for interest-rate increases was less urgent as it trimmed its economic-growth forecast.
Now moving above parity for the first time late last week since November, the Canadian currency is deemed to give up more gains to the Greenback today as there is not much lift expected from the Loonie. The currency pair is now poised to challenge the 1.0100 price level after gaining the most in eight months. Friday’s late exchanges flirted with the aforementioned price mark, and yet again earlier today.
In the recent monetary policy report from the Bank of Canada, BOC Governor Mark Carney said the need to raise interest rates is less urgent because the economy will take longer to reach full output, keeping inflation below target until the second half of next year. “The more muted inflation outlook and the beginnings of a more constructive evolution of imbalances in the household sector suggest that the timing of any such withdrawal is less imminent than previously anticipated,” Carney said at the press conference.
Further, Canadian inflation fell more than the median estimate of minus 0.2 percent, reaching a minus 0.6 percent in December. “We expected the numbers to be soft, but they fell even lower than expected,” said David Watt, chief economist at the Canadian unit in Toronto of HSBC Holdings Plc. “Canadian inflation is lingering near the lower part of the Bank of Canada target band and that provides more confirmation that Bank of Canada will not be raising interest rates anytime soon.”
Bearish remarks on the Loonie suggest a sell bias for the USDCAD to start the week’s exchanges. Nevertheless, it would be wise to keep watch for probable technical price corrections in the day’s trades.
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