The Canadian dollar has outperformed in recent weeks. That’s despite ongoing weakness in crude oil, which is Canada’s main export commodity. So, what’s driving the CAD higher? Expectation about tighter monetary conditions in Canada, after the Bank of Canada delivered a strong hint a couple of week about raising interest rates. Those expectations could be revised however in the event crude oil falls furthers and stays weak, or if incoming data deteriorates once again.
U.S. indices are seen pulling a little further away from record high levels on Wednesday, as we appear to see a slight shift in risk appetite although there are no signs at this stage of a broader trend developing.
The euro/British pound currency pair has actually respected its long-term resistance in the 0.8860-85 range, an area which was formerly seen as support. But, so far, we haven’t seen a breakdown in market structure.
Economic data released this week has the market questioning how serious the Fed is about its economic forecasts as inflation, retail sales and building permits all came in lower than expected this week. The Trump administration continues to be caught in the turmoil of the Russian connection investigation and it now appears the President will be under investigation doing the dollar no favors.
The euro/U.S. dollar currency pair lost 0.749% in the last five days. The single currency is trading at 1.1193 after the ECB met expectations by keeping the interest rate and quantitative easing program unchanged. The central bank did remove the reference to rate cuts, and President Draghi praised the momentum of the economy, while at the same time warning of weak inflation.