USD/CAD is subdued in the Friday session. Currently, the pair is trading at 1.2433, down 0.22% on the day. On the release front, there are no Canadian or US events on the schedule. US markets are closed in observance of Martin Luther King Day. On Tuesday, the sole indicator is the US Empire State Manufacturing Index.
The Canadian dollar improved on Friday, as investors were not impressed with lukewarm numbers in the US. CPI slowed to 0.1%, down from 0.4% a month earlier. Core CPI was stronger, improving to 0.3%. Both indicators were within expectations, but pointed to weak inflation levels. On the bright side, consumer spending remained strong. December retail sales, boosted by Christmas shopping, were up 5.4% compared to a year ago. Although investors were not impressed with the December data, as the euro rally continued, the spending numbers point to a strong finish for the economy in 2017.
After strong gains in December, the Canadian dollar has held its own against the greenback in January. There are two important factors for this positive trend. First, Canada has recorded outstanding employment numbers in the past two months. In December, the economy added 78.6 thousand jobs, defying experts who predicted a minuscule gain of 1.8 thousand. This release comes on the heels of a superb November release, when the economy added 79.5 thousand news jobs. The unemployment rate dropped to 5.7% in December, down from 5.9% a month earlier. Second, the recent rise in oil prices, which are up 6.8% since mid-December, has boosted the commodity-based Canadian currency. The Bank of Canada is expected to raise rates later this week, which could boost the Canadian dollar. One dark cloud on the horizon, however, is NAFTA. The free-trade agreement, crucial to the Canadian economy, is in trouble, as US President Trump has threatened to cancel the pact, which could have serious ramifications and send the Canadian dollar sharply lower.
