The Canadian dollar is almost unchanged in the Wednesday session. Currently, USD/CAD is trading at 1.2864, down 0.02% on the day. On the release front, there are no Canadian releases on the schedule. In the US, CPI is forecast to improve to 0.4%. The Federal Reserve meets for its monthly policy meeting, and is widely expected to raise rates to a range between 1.25% to 1.50%. On Thursday, Canada releases NHPI and Bank of Canada Stephen Poloz speaks at an event in Toronto. The US will release retail sales reports as well as unemployment claims.
Will the Federal Reserve press the rate trigger on Wednesday? The CME Group has priced in a quarter-point rate hike at 87%, so it would be a huge surprise if the Fed doesn’t raise the benchmark rate. Even though this move has been priced in, rate hikes tend to trigger a surge of confidence among investors, and a rate hike could boost global stock markets. Today’s move could be the start of a series of incremental hikes, as the odds of a January increase stand at 86%. The Fed has hinted that it could raise rates up to three times in 2018, but the pace of increases will depend to a great extent on the strength of the economy and inflation levels. The US labor market remains at full capacity and various sectors in the economy are reporting a lack of workers. Still, this has not translated into stronger wage growth, despite predictions from Janet Yellen and other Fed policymakers that a lack of workers is bound to push up wages.
It has been slim pickings for investors looking at Canadian fundamentals, as there are only two indicators this week. On Thursday, Canada releases a housing report, followed by Manufacturing Sales on Friday. The markets are expecting that the manufacturing indicator will jump to 0.9%, which could give a boost to the struggling Canadian dollar. The indicator has posted two straight gains, easily beating the estimate on both occasions. Investors will be keeping a close eye on the Fed, and the expected rate hike on Wednesday could push the Canadian dollar lower.
