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Canadian Dollar Steady Ahead of Key Manufacturing Report

USD/CAD has ticked upwards in the Wednesday session. Currently, the pair is trading slightly below the 1.31 level. On the release front, Canadian Manufacturing Sales is expected to post a strong gain of 1.4 percent. In the US, it’s a busy day. We’ll get a look at release retail sales and CPI reports, and Janet Yellen will continue her testimony about the semiannual Monetary Policy Report before Congress. On Thursday, the US releases three key events – Building Permits, Philly Fed Manufacturing Index and unemployment claims.

All eyes are on Fed Chair Janet Yellen this week. The Fed chair testified before a Senate committee on Tuesday, and was surprisingly upfront about monetary policy, stating that she expected that the Fed would raise rates in the near future. Yellen stated that "waiting too long to remove accommodation would be unwise", referring to the re-hot labor market and expectations that inflation would reach the Fed’s target of 2 percent. Will the Fed opt to raise rates in March or in June? The markets will be looking for clues on the timing of a move, as Yellen continues her testimony on Thursday before the House Financial Services Committee.

Canadian Prime Minister Justin Trudeau met with President Trump in Washington on Monday. It was "mission accomplished" for the Canadian leader, who was looking for reassurances from Trump that he would not tear up NAFTA, the trade agreement which is the bedrock of the trade relationship between the two countries. After the leaders met, Trump said his biggest concern with NAFTA was with Mexico rather than its northern neighbor. Trump stated that the US has a "very outstanding trade relationship with Canada. We’ll be tweaking it." Trudeau could do without the tweaking, but Trump’s comments nonetheless come as an enormous relief to the Canadian leader. Given that 80 percent of Canadian exports go to the US, any significant protectionist measures from the US could have drastic negative implications for the Canadian economy.

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