The USD/CAD pair is trading with mild losses around the 1.4395 mark during the early Asian session on Friday. The pair has been pressured by the weakening US Dollar (USD) and a broader decline in US yields across the curve.
US Economic Data:
US Retail Sales: Data released by the US Census Bureau showed that US Retail Sales rose by 0.4% MoM in December, reaching $729.2 billion. This figure came in weaker than the market expectations of a 0.6% increase and was lower than the previous month’s revised 0.8% rise (originally 0.7%). The weaker-than-expected Retail Sales data has pressured the USD lower.
Market Outlook for USD: The Greenback has edged lower following the disappointing Retail Sales data, but the downside potential for the USD might be limited. This is due to the Federal Reserve’s (Fed) cautious approach toward cutting interest rates in the coming months, which provides some support to the USD despite the weaker data.
Canadian Dollar (Loonie) Developments:
US Trade Tariffs and BoC Actions: Investors are on alert for potential US trade tariffs from President-elect Donald Trump, which could have a significant impact on the Loonie. At the same time, the Bank of Canada (BoC) has signaled that it will end its quantitative tightening program in the coming months.
BoC’s Stance: BoC Deputy Governor Toni Gravelle mentioned on Thursday that while the BoC plans to conclude its quantitative tightening program in 2025, it does not plan to immediately pivot toward quantitative easing, as it did in previous years. This nuanced approach from the BoC is providing some stability to the Canadian Dollar.
Focus on Upcoming Data:
US Housing Data: Investors are awaiting US housing data for December, including Building Permits and Housing Starts, which are set to be released later on Friday. These figures could offer further insights into the US economic recovery and influence USD/CAD price action.
US Industrial Production: The release of Industrial Production data for December is also on the horizon. Any signs of slowdown in industrial activity could weigh on the USD, while stronger-than-expected numbers may support the Greenback.
Technical Outlook: USD/CAD has been pressured by the weaker US Dollar and declining yields, but the pair remains above the critical support zone. The upcoming data could provide the catalyst needed to push the pair in either direction. Traders will keep an eye on these releases, particularly any unexpected surprises that could shift market sentiment.
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