USD/CAD is slightly lower at the start of the week. Currently, the pair is trading at 1.3302, down 0.18% on the day. In the U.S., the Empire State Manufacturing Index improved to 10.1, beating the estimate of 8.1 points. Later in the day, Canada releases the BoC Business Outlook Survey. This indicator provides a snapshot of business sentiment, and should be treated as a market-mover. On Tuesday, Canada releases manufacturing sales, which is expected to decline by 0.1% in February, after a strong gain of 1.0% in January.

The Bank of Canada remains in dovish mode and may freeze rate hikes until 2020. The lack of activity from the BoC could weigh on the Canadian dollar, as the prospect of higher rates would make the Canadian currency more attractive to investors. Last week, the IMF downgraded economic forecasts worldwide, and Canada was no exception. The IMF lowered its forecast for the Canadian growth from 1.9% to 1.5%. The report noted that Canada would be a major beneficiary if the U.S and China can hammer out a deal and end their bruising trade war. The IMF also lowered its forecast for global growth, from 3.5% to 3.3%.

There was positive news on the U.S. inflation front last week, as key indicators headed higher in March. CPI, the key gauge of consumer spending, climbed to 0.4%, its highest gain since January 2018. The producer price index also looked strong, climbing 0.6%, a 5-month high. Inflation remains well below the Federal Reserve target of 2.0%, but stronger inflation numbers will bolster the case of Fed officials who favor raising rates in 2019 if the economic outlook improves. The Fed minutes from the March meeting left the door open to further rate hikes this year, but current market pricing suggests no hikes until 2020, and some analysts are expecting a cut in rates later this year.

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