- USD/CAD rallied above 1.3400 after strong US economic data, putting pressure on the Federal Reserve.
- US Retail Sales for January beat estimates, supporting hawkish comments from Fed officials.
- Money market futures call for two 25 basis point rate hikes by the US Federal Reserve.
He USD/CAD remains higher after reaching a daily high of 1.3440, although it has trimmed some of its gains, but remains above its opening price. Data from the United States (US) sparked speculation that the Federal Reserve (Fed) would continue to tighten its policy, with forecasts putting the Federal Funds Rate (FFR) at around 5.10%. At the time of writing, the USD/CAD pair was at 1.3422, after hitting a low of 1.3331.
The positive United States (US) Retail Sales report boosted the US dollar (USD) on speculation that the Fed is on track to rein in high inflation. The US Department of Commerce revealed that Retail Sales in January increased significantly by 3.0% compared to the previous month, which exceeded the growth of 1.8% expected by analysts. This increase in sales came after two consecutive months of decline. The main factor contributing to the increase in sales is the rigidity of the labor market, which has led to substantial growth in wages. In addition, the rise in gasoline prices could have pushed sales up.
Following the data release, US Treasury yields, specifically the two-year note rate, the most sensitive to interest rate fluctuations, peaked at around 4,703 %, reflecting that traders expect at least two more rate hikes, as futures data shows. Money market futures estimate that the FFR would be in the range of 5.0%-5.25%, which means that increases of 25 basis points are expected in the March and May meetings.
Hence, USD/CAD approached its daily high at 1.3428 before reversing course below 1.3400. However, the London session provided fresh impetus for USD/CAD bulls, who are looking to break above the 50-day EMA at 1.3429.
On the Canadian side, housing starts fell 13% in January “from 215,365 the previous month, well below the 240,000 units economists were expecting,” according to Reuters. Although Canadian bond yields rose, falling oil prices weighed on the Loonie (CAD).
Late-minute, US Industrial Production (IP) was unchanged, the US Federal Reserve (Fed) reported, while production came in weaker than expected, driven by rising prices. borrowing costs in the manufacturing sector.
USD/CAD Key Technical Levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
