The Canadian dollar has ticked lower in the Thursday session. In the North American session, USD/CAD is trading at 1.3228, down 0.03% on the day. On the release front, Canadian Corporate Profits posted a strong gain of 3.9%, marking a 4-month high. In the U.S, banks and stock markets are closed for Thanksgiving and there no indicators on the schedule. On Friday, Canada releases CPI and retail sales reports.
U..S stock markets fell sharply on Tuesday, dragged down by technological stocks. The Dow Jones and S&P 500 indices both gave up their year-to-date gains. The drop sent the Canadian dollar reeling, as investors avoided risk assets and USD/CAD jumped over 1 percent, pushing above the 1.33 level for the first time since late June. However, stock markets have recovered, as has the Canadian dollar, which posted gains on Wednesday. The sharp drop in the equity markets points to nervousness on the part of investors, as the nagging U.S-China trade dispute has taken a bite out of both economies, and investors are concerned that the conflict will dampen the current economic expansion in the United States and further corrections in global equity markets could mean more headwinds for the wobbly Canadian dollar.
This week’s turmoil in the stock markets has raised questions about the Federal Reserve’s monetary policy. The markets had expected the Fed to raise rates up to four times in 2019, but with more signs that the U.S. economy could slow in 2019, policymakers may ease up on the pace of rate hikes. The Federal Reserve remains on track to gradually raise rates in 2019, but the pace could be slower than anticipated just a few weeks ago. There’s no denying that the U.S economy is currently in great shape, with unemployment at historically low levels and the $1.5 trillion tax cut package boosting economic growth. However, the rosy picture could change next year. The U.S-China trade war is expected to take a bite out of U.S growth, and the stimulus from the tax cut will fade over time. Economic growth has been slowing, with third-quarter growth expected at 2.7%, down from 3.5% in the second quarter. A rate increase in December remains a strong possibility, with the odds of a rate hike standing at 76%.
