The Canadian dollar has posted slight losses in the Wednesday session. Currently, the pair is trading at 1.2281, down 0.45% on the day. On the release front, Canada releases GDP for December, which is expected to climb to 0.4%. Canada will also release an important inflation indicator, the Raw Materials Price Index. The markets are braced for a sharp drop of 2.2%. In the US, the markets will get a good look at employment numbers, starting with ADP Nonfarm Employment Change. The indicator is expected to slow to 186 thousand. The Federal Reserve will release a monetary policy statement, with the markets expecting the benchmark rate to remain unchanged at a range between 1.25%-1.50%. On Thursday, the US publishes unemployment claims and the ISM Manufacturing PMI.
The latest round of negotiations over NAFTA ended in Montreal last week, and there were no breakthroughs. Still, the sides continue to talk, and a Merrill Lynch has lowered the odds of the US leaving the pact to 25 percent. The US has demanded far-reaching concessions from Canada and Mexico, such as shifting more auto production to the US. Canada and Mexico are strongly opposed to the US demands, but both economies would take a sharp hit if NAFTA is terminated. At the same time, many US businesses don’t want to blow up NAFTA and are pressuring President Trump to remain in the trade pact. The next round of negotiations is scheduled for late February in Mexico.
All eyes are on the Federal Reserve, which will make a rate announcement on Wednesday, the final one under Janet Yellen’s watch. The tone of the rate statement could affect investor sentiment and have an impact on gold prices. It’s a virtual certainty that the Fed will leaves rates unchanged this time around, although it’s likely that the Fed will raise rates by a quarter-point at the March meeting. Yellen will make way for Jerome Powell, who takes over as chair in early February. Powell is expected to hold the course on monetary policy, which was marked by small, incremental interest rates in order to keep the robust US economy from overheating.