The Canadian dollar posted its best week since June, jumping 1.9%. On Monday, the pair is trading at 1.3351, down 0.18% on the day. It’s a quiet start to the week, with just two events. Canada releases Ivey PMI, which is expected to improve to 58.1 points. The U.S. posts ISM Non-Manufacturing PMI, which is forecast to dip to 59.6 points. On Tuesday, Canada posts trade balance and the U.S publishes JOLTS Job Openings.
After a bumpy start to the week, risk appetite improved, helping boost the Canadian dollar. Investors were pleased with dovish comments from Fed Chair Jerome Powell on Thursday. The markets had dropped sharply after the Fed’s December rate statement, which was less dovish than expected, as the Fed said it would continue raising interest rates in 2019. Powell tempered this stance on Thursday with a more cautious outlook over rate policy. He said that he was aware of the risks of a slowdown in the U.S. economy and that the Fed would be patient in its policy decisions. The Fed is currently forecasting two rate hikes next year, but some analysts have forecast a rate cut next year, with the U.S. economy expected to slow down, compared to its torrid pace in 2018.
The Canadian dollar posted strong gains on Friday, after solid employment numbers. The economy created 9.3 thousand jobs, beating the estimate of 6.8 thousand. The unemployment rate remained pegged at 5.6%, edging below the forecast of 5.7%. U.S. employment numbers were sharp. Nonfarm payrolls jumped to 312 thousand, its highest level since February, while wage growth improved to 0.4%, up from 0.2% in the previous release.
The markets are keeping a close eye on U.S.-China trade talks, which started on Monday in Beijing. With the threat of more U.S tariffs on March 1, negotiators will be under pressure to produce some results after a bruising trade war that has shaken global equity markets and has slowed down the giant Chinese economy. If the sides report any progress, risk appetite will improve and the Canadian dollar could respond with gains.
