The Canadian dollar has recorded slight gains in the Wednesday session. Currently, USD/CAD is trading at 1.2468, up 0.17% on the day.
Canada CPI misses target
February CPI came in at 0.5%, ticking lower from the 0.6% gain beforehand. This missed the forecast of 0.7%, but was still within expectations. The core reading slowed to 0.3%, down from 0.5%.
The week started with mixed economic data. Manufacturing Sales for January jumped 3.1%, its best showing in six months. The strong gain would have been even higher, but auto manufacturing posted a decline, due to a worldwide shortage of semiconductor chips, which has affected the motor vehicle sector across North America. Housing Starts fell from 282 thousand to 246 thousand, but was within expectations.
All eyes on FOMC meeting
The currency markets are in a holding pattern ahead of tonight’s FOMC policy meeting (18:00 GMT). This meeting has taken on added significance, as FOMC members are meeting for the first time since inflation expectations have risen, sending US yields sharply higher. Fed Chair Powell hasn’t expressed any worries about higher yields, and we’ll see if this tune remains the same at the upcoming meeting. Powell will have to craft his message carefully, as any optimism over the economic recovery will need to be tempered in order to dispel concerns over overheating and rate hikes. Powell is expected to reiterate that the Fed continues to have a dovish stance, but at the same time growth and inflation forecasts are expected to revised upwards. It will be interesting to see how the market reacts to the FOMC, and the meeting could be a market-mover for the US dollar.
USD/CAD Technical
- USD/CAD is facing resistance at 1.2631, followed by resistance at 1.2784
- On the downside, there is support at 1.2393. The next support level is at 1.2308
