USD/CAD Traders On High Alert Following U.S. CPI’s Failure To Shift Fed Outlook
USD/CAD bulls have been in action this week with the price of the currency pair surging to a new weekly high of 1.3346 despite an uncertain outlook for the Consumer Price Index (CPI) in the U.S. Price action has increased the risk of a bigger rebound because the price level has been reaching new highs and lows.
The CPI report did not prompt the U.S. Federal Reserve to change its monetary policy outlook despite the core inflation rate narrowing for the second month. Meanwhile, the Average Weekly Earnings which was at 1.9% in March fell to 1.3%. The Fed might shift from the hiking cycle on the heels of muted inflation signals as well as limited wage growth.
The economy has been losing its growth momentum according to data
Data released since September last year indicates that the rate of growth has been slowing down faster than expected. Regardless, the economy seems to be operating very well, thus preventing the Federal Open Market Committee (FOMC) from intervening. The Federal Reserve has also promised to be patient before introducing any policy changes.
FOMC might influence USD/CAD's short-term outlook if the Fed Fund Futures present a more than 50% chance of a rate cut towards the end of the year. It also depends on whether the central bank will change its monetary policy's forward guidance. The situation is somewhat similar to FOMC because it might end up supporting the currency pair.
Another interest rate review is scheduled to take place on May 1, during which the central bank not expected to change the prevailing policy. This might kick-off bullish USD/CAD performance over the next few days where the currency pair will likely reach new highs and new lows.
USD/CAD’s latest performance and the influence of the oil sector
The bears dominated the USD/CAD on Monday when the Canadian dollar fell under pressure as crude oil prices dropped. However, the currency pair turned bullish on Thursday, thus recovering most of the losses that it suffered at the start of the week. The International Energy Agency (IEA) revealed that it had not changed its global oil demand growth forecast for 2019. This means that its forecasted demand growth is still 1.4 million barrels daily.
The IEA also noted that the Non-OPEC supply growth sharply slowed down to 2.4 million barrels per day in Q1 2019. Meanwhile, the USD/CAD pair closed Wednesday’s trading session at a not so appealing level courtesy of the FOMC’s conservative approach. Conversely, the West Texas Intermediate (WTI) pulled back to around $64 on Thursday. Nonetheless, the US Dollar Index had minor gains around the 97 level, thus pushing the pair to a higher level.
The USD/CAD also gained some ground after the announcement of a weekly initial jobless report and the Producer Price Index (PPI). The currency pair also received some motivation after the announcement of Canada’s New Housing Price Index. Meanwhile, the price level of the currency pair has comfortably been hovering around the 97 handle.