USD/CAD has posted gains in the Thursday session. Early in North American trade, the pair is trading at the 1.31 line. On the release front, Canadian Corporate Profits posted a gain of 3.6%. This marked a second straight gain after four straight declines. In the US, unemployment claims rose to 244 thousand, slightly above the estimate of 242 thousand. As well, Treasury Secretary Robert Mnuchin will speak at an interview with CNBC. Friday will be busy, as Canada releases CPI. In the US there are two key events – New Home Sales and UoM Consumer Sentiment.
On Wednesday, the Federal Reserve released the minutes of its January policy meeting. However, there were no dramatic comments in the minutes, which were slightly dovish in tone. The key statement in the minutes was that a rate hike "fairly soon" could be appropriate in order to head off an overheated economy. The minutes indicated that Fed policymakers remain confident that the central bank will raise rates gradually, given the strong performance of the US economy. At the same time, the minutes noted uncertainty about President Trump’s fiscal stimulus plan but little concern over the risk of inflation. Bottom line? Although pressure is slowly building towards a rate hike, there does not appear a sense of urgency to raise rates at the next meeting in March. According to the CME Group, the odds of a March hike are only at 17%, while the likelihood of a hike in either May or June stands above 40%.
Canadian consumers are in a surly mood and cut back in spending in December, to the surprise of the markets. Core Retail Sales declined 0.3%, compared to a forecast of +0.8%, while Retail Sales dropped 0.5%, missing the forecast of +0.1%. Will inflation levels point upwards despite weak consumer spending? The week wraps up with a host of inflation indicators on Friday, highlighted by CPI. The index has posted two straight declines, but the markets are expecting a 0.3% gain in the January report. If CPI exceeds expectations, the Canadian dollar could continue to move higher.