The Canadian dollar is showing little movement in the Thursday session. Currently, USD/CAD is trading at 1.2978, down 0.04% on the day. On the release front, Canada releases the New Housing Price Index, which is expected to rise to 0.2%. In the U.S, consumer spending is expected to improve in May, with Retail Sales expected to rise to 0.4% and Core Retail Sales predicted to rise to 0.5%. Unemployment Claims is expected to tick up to 223 thousand. On Friday, the US publishes manufacturing and consumer confidence reports.
The markets had priced in a rate hike from the Federal Reserve on Wednesday, and the Fed didn’t disappoint. The central bank raised interest rates by a quarter-point, to a range between 1.75 percent and 2.00 percent. Fed Chair Jerome Powell sounded hawkish in his press conference, saying that the economy was performing well and that “overall outlook for growth remains favorable”. This message echoed the rate statement, in which policymakers said that “economic activity has been rising at a solid rate”, pointing to stronger consumer spending and business investment. What was may have been the most notable development was that the Fed rate projections were revised upwards, predicting two additional rate hikes in 2018, for a total of four hikes. Until now, the Fed had projected three rate hikes this year. This represents a nod to the strength of the U.S economy and could boost the dollar against its rivals.
Trade negotiators on both sides of the border could use a tip or two from soccer officials, as the joint bid from the U.S, Canada and Mexico won the right to host the 2026 World Cup. Such cooperation is only wishful thinking on the trade front, as the three countries remained deadlocked over the NAFTA agreement, notably over the U.S demand to increase the U.S content of cars produced in Canada or Mexico. A new headache for negotiators could be the Mexican national elections on August 1, with a leftist candidate, Andrés Manuel López Obrador, holding a comfortable lead at the polls. If Obrador wins the election, a new NAFTA deal could prove even more elusive, which could be bad news for the Canadian dollar.