The Canadian dollar has posted slight gains in the Thursday session. Currently, the pair is trading at 1.2328, down 0.15% on the day. On the release front, it’s a busy day on both sides of the border. Canada will release retail sales reports, while the US publishes unemployment claims and New Home Sales. On Friday, Canada publishes CPI and the US releases Advance GDP and durable goods reports.
The Canadian economy has been performing fairly well, but there is a dark cloud on the horizon regarding NAFTA. The free trade agreement is critical for the Canadian economy, so threats by US President Trump to blow up the agreement are causing genuine concern for the government and the Bank of Canada. Negotiations between Canada, Mexico and the US have not yielded much progress, and a sixth round of negotiations started on Tuesday in Montreal. Trump has repeatedly said he is unhappy with the deal, and would prefer a new bilateral agreement between the US and Canada. Still, Trump is unpredictable, and there are also many US companies that benefit from the current deal and are opposed to the US pulling the plug. If NAFTA is terminated, it’s a good bet that the Canadian dollar will take a tumble.
It should be a smooth transition for the Federal Reserve, as Jerome Powell is set to replace Janet Yellen as chair of the powerful central bank. On Tuesday the Senate confirmed Jerome Powell as the next head of the powerful Federal Reserve on Tuesday. The vote of 84-13 was a cakewalk, reflecting strong bipartisan support for Powell. The new chair is expected to continue Yellen’s monetary stance, which was marked by small, incremental rate hikes during a period of economic expansion. The Fed has started to trim its massive balance sheet, another vote of confidence in the strength of the economy. At the same time, Fed policymakers are divided over how to approach inflation, which remains below the Fed target of 2 percent, despite a strong economy and a red-hot labor market. Another unknown is how the recent tax reform legislation will impact the US economy, and investors will be looking at the Fed as one of the sources for guidance.
The US Senate confirmed Jerome Powell as the next head of the powerful Federal Reserve on Tuesday. The vote of 84-13 was a cakewalk, reflecting strong bipartisan support for Powell. The new chair is expected to continue Janet Powell’s monetary stance, which was marked by small, incremental rate hikes during a period of economic expansion. The Fed has started to trim its massive balance sheet, another vote of confidence in the strength of the economy. At the same time, Fed policymakers are divided over how to approach inflation, which remains below the Fed target of 2.0%, despite a strong economy and a red-hot labor market. Another unknown is how the recent tax reform legislation will impact the US economy, and investors will be looking at the Fed as one source for guidance.
