The Canadian dollar has edged higher in the Monday session. Currently, USD/CAD is trading at 1.3209, down 0.22% on the day. There are no releases out of Canada or the U.S. on the schedule. On Tuesday, the U.S. releases CB Consumer Confidence, which is forecast to dip to 136.2 points.
There was good news on Friday, as Canadian consumer spending and inflation data improved. However, the Canadian dollar failed to take advantage and lost ground. CPI posted a gain of 0.3%, after two straight declines. This beat the estimate of 0.1%. Retail sales bounced back with a gain of 0.2%, after a decline of -0.1%. This was above the forecast of 0.1%. Inflation is within the Bank of Canada’s inflation target – on an annualized basis, CPI rose 2.4% in October and 2.2% in September.
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.
