The Canadian dollar is showing limited movement in the Thursday session. Currently, USD/CAD is trading at 1.2885, up 0.11% on the day. In the US, durable goods orders are expected to soften, and unemployment claims are forecast to drop slightly. There are no Canadian events on the schedule. On Friday, the US releases Advance GDP and UoM Consumer Sentiment.
Bank of Canada Governor Stephen Poloz testified before a parliamentary committee earlier this week, and his message about the economy was positive. Poloz said that he expected the economy to improve after a disappointing first quarter, and forecast that inflation would push above BoC’s target of 2% later in 2018. The bank maintained the benchmark rate at 1.25% last week, but is expected to raise rates as early as May. Policymakers are hoping that the NAFTA negotiations will make sufficient progress to enable the sides to announce an agreement framework, with the fine print to be finalized later in the year.
The US dollar continues to shine and the Canadian dollar has dropped 2.1% since April 16. On Friday, the US dollar has pushed the Canadian currency to the 1.29 level for the first time since April 3. Much of the credit for the greenback rally goes to rising yields on US bonds, which hit 4-year highs this week. On Wednesday, 10-year US Treasury notes climbed above the symbolic level of 3.0%, which led to investors snapping up bonds at the expense of equities. As oil prices have been moving higher, this has led to expectations of higher inflation, which in turn, has increased sentiment that the Federal Reserve will increase rates four times in 2018, rather than three hikes. This has made the US dollar more attractive to investors.
