The USD climbed to a two week high versus most major currencies, U.S. interest rates continue to rise on expectations of further hikes by the Federal Reserve. Canada’s economic data reinforces Wednesday’s comments by the Bank of Canada, even though inflation rose at its fastest pace in more than three years. The three core measures preferred by the BoC averaged 2% in March, down from February’s 2.03%. Once gasoline prices are removed the inflation rate is 1.8%.
February retail sales disappointed increasing only a monthly 0.4 percent, lower than expectations for a 0.5 percent increase. On the year, sales were up 3.5 percent. Higher sales at new car dealers and general merchandise stores were the main contributors to the gain.
USDCAD 1.2710, 1.2650, 1.2641 1.2726, 1.2740, 1.2813
USD-CAD rebounded to a 10-day high of 1.2676, building on a recovery from Wednesday’s two-month low at 1.2527. A correction in oil prices, which have descended to back near the $68.0 in the WTI benchmark market after making a 40-month high at $69.56, along with a generally firmer bias in the U.S. dollar, have driven the rebound in USD-CAD. The Canadian dollar had already been coming off the boil in the wake of the BoC’s mid-week policy meeting, where the statement indicated that the central bank would maintain its cautious stance on future policy changes, which remain data dependent. The latest price action in USD-CAD suggests a weakening in the downside trend that’s been developing over the last three weeks, from levels near 1.3100. Resistance is at 1.2700.
EUR-USD broke lower today, dropping through recent range lows at 1.2299-1.2307 on route to posting an 11-day low at 1.2293. The aforementioned former range lows now revert as resistance levels. Fresh declines in Cable following relatively dovish remarks by BoE Governor Carney, along with broader dollar firmness, drove the downside move in EUR-USD. There is also backdrop fundamental justification, with softer Eurozone inflation and ZEW survey data having been seen this week by further developing a Eurozone economic-slowing theme. In the bigger view, EUR-USD still remains near the midway levels of a broad consolidation range that’s been seen for some two months now, which has followed a 14-month rally phase from sub-1.0500 levels. More of the same seems likely, with the odds for a big-picture breakout seeming low at the present time. Near-term risks look to be skewed to the downside. Key support is at 1.2214-15.