The Canadian dollar has been under pressure as economic data out of the United States and statements from Federal Reserve members have boosted the U.S. dollar. The majority of the market’s focus this week was going to be centered on the European Finance Ministers meeting to discuss the Greek debt agreement proposal. The week is light on the U.S. economic release front, but the few that were on the agenda have been mixed. U.S. existing home sales beat expectations with 5.3 million homes sold in May was reported on Monday. Core durable goods fell slightly below, but looking deeper into the data the rise of capital equipment signals the end of the slump American businesses showed during the first quarter of the year.
Federal Reserve Governor Jerome H. Powell gave the U.S. interest rate divergence argument a lift, by stating that there could be two rate hikes this year. One as soon as September and another one in December. The fact that Powell is a voting member of the Federal Open Market Committee lends his words a lot of credibility. He also said that his estimate for the growth of the U.S. economy is 2 percent in 2015. The comments had a positive effect on the USD across the board although there are still questions around if the U.S. economy will be able to sustain the pace of growth needed to justify further rate hikes.
The USD/CAD rose 0.226 percent in the last twenty four hours. The loonie got some help from rising oil prices that saw a 2 percent increase on Tuesday, but it was not enough to contain the rising USD. The start of the driving season in the United States has increased the demand for gasoline and crude inventories are expected to fall justifying the rise of the black stuff. The upwards move of crude faces tough challenges ahead as OPEC continues to pump at record high levels while in the background the nuclear deal with Iran is moving closer to reality. Both would put heavy downward pressure on crude prices if not for the higher seasonal demand.
The loonie is trading at 1.2341 with limited Canadian releases to help its cause coming up. Instead there are more opportunities for the U.S. dollar to gain more ground with the Final gross domestic product to be published on Wednesday, June 24 and the unemployment claims the following day. Greece will continue to dominate the headlines, but as optimism rises as a deal seems closer than ever the focus has shifted to the USD and the possibility of an end of record low interest rates in America. That being said, all things Greek are not certain and we may yet witness maybe not a Grexit, but a Greccident if the parliament in Athens rejects the still in progress agreement, or if the IMF is not convinced Greece can achieve the new targets.