The Canadian dollar is unchanged in the Wednesday session. Currently, the pair is trading at 1.3354, unchanged on the day. On the release front, there are a host of key events. Core durable goods orders are expected to remain at 0.1%, while core durable goods is forecast to slide by 0.5%. On the inflation front, PPI and Core PPI are both projected to post a slight gain of 0.2%. There are no Canadian events on the calendar. On Thursday, the U.S. posts unemployment claims.
The Bank of Canada has been sending a dovish message to the markets, echoing the stance of the Federal Reserve. With Canada’s economy posting two straight declines, the economic slowdown appears deeper than the bank expected. The BoC hasn’t raised rates since October, and the freeze could continue until the second half of the year. If the economy does not rebound, policymakers will have to consider a rate cut, which could stimulate economic activity but would push the Canadian dollar downwards.
The Federal Reserve has been in dovish mode since the start of the year, and weak inflation data has meant there is little pressure on policymakers to raise rates in the near future. Core CPI edged down to 0.1%, while CPI remained steady at 0.2%. Consumer inflation remains well below the Federal Reserve’s target of 2.0 percent, so there is little pressure on the Fed to raise rates anytime soon. Policymakers have been signaling that the Fed could stay on the sidelines until the second half of 2019, and this stance was underscored by Fed Chair Powell in a television interview on Sunday. Powell left no doubt about where the Fed stands, saying that the Fed would remain patient and was in no hurry to change interest rate policy. The dovish stance of the Fed could weigh on the dollar, as a lack of rate hikes makes the greenback less attractive to investors.
