The Canadian dollar has edged lower in the Friday session, erasing the gains seen on Thursday. Currently, USD/CAD is trading at 1.3237, up 0.34% on the day. On the release front, Canada releases key consumer inflation and spending data. CPI is expected to post a small gain of 0.1%, after two straight declines. Core retail sales is forecast to gain 0.3% and retail sales is expected at 0.1%. The U.S. will release services and manufacturing PMI reports.
A tumultuous week on global stock markets caused plenty of jitters for investors. That translated into bad news for the Canadian dollar, as risk appetite waned. The Canadian currency was down as much as 1.3% earlier this week, but has recovered some of these losses after stock markets reversed directions and moved higher. The rout was triggered by a sharp drop in technology stocks, as the ongoing tariff war between the U.S. and China has put a damper on global growth. The stakes are high, as the markets hope for a breakthrough at the G20 summit in Argentina next week, when President Trump meets with Chinese leader Xi Jinping. If the two leaders can lower trade tensions between the U.S. and China, the Canadian dollar could respond with gains.
The markets have grown accustomed to strong economic numbers from the U.S, but quarterly GDP reports point to a slowdown, and there has even been talk of a recession. This has led to speculation that the Federal Reserve could ease up on its interest rate hikes next year. Only a few weeks ago, there were expectations that the Fed could raise rates each quarter in 2019, but the mood has become more cautious. The U.S.-China trade war has caused a slowdown both economies, and President Trump’s $1.5 trillion tax cut has boosted the economy, but its effect on the economy is fading. A rollback in U.S rate hikes would make the greenback less attractive to investors, which would be good news for the Canadian dollar.
