USD/CAD – Canadian dollar falls on Mexican tariffs jitters, GDP rebounds

USD/CAD has posted considerable gains in the Friday session. Currently, the pair is trading at 1.3529, up 0.21% on the day. On the release front, there are key events on both sides of the border. Canadian GDP rebounded in March with a gain of 0.5%, after a decline of 0.1% in February. This edged above the forecast of 0.4%. The Raw Materials Price Index jumped 5.6%, well above the estimate of 2.3%. In the U.S., consumer data was also in the spotlight. The Federal Reserve’s preferred inflation gauge, Core PCE Price Index, improved to 0.2%, matching the forecast. However, personal spending slowed to 0.3%, after a strong gain of 0.9% in the previous release. Consumer confidence also softened, dropping from 102 in April to 100 in May.

The Canadian dollar is sensitive to trade risks, and has lost ground on Friday after President Trump threatened to slap tariffs on all Mexican products, due to the illegal immigration problem. Although Trump said that tariffs would be set at just 5%, risk appetite has fallen, sending the Canadian dollar lower. There was more negative news out of China, as manufacturing PMI dipped into contraction territory, with a reading of 49.4, shy of the estimate of 49.9 points. The Chinese economy has been hit hard by the trade war with the U.S., which has weakened global demand. This, in turn, has hurt export-reliant economies such as Canada, which has weighed on the Canadian dollar.

Which way is the Canadian dollar headed? There are factors which could support a move in either direction. The labor market has improved, and created a record number of jobs in April. Consumer spending, a key driver of economic growth, also remains strong. On the negative side, trade tensions between the U.S. and China have soared, which has hurt risk appetite, making minor currencies like the Canadian dollar less appealing. As well, oil prices have fallen, which has weighed on the Canadian currency.

Trade War Selling Takes a Breather

China manufacturing PMI drops below 50 again

USD/CAD Fundamentals

Friday (May 31)

• 8:30 Canadian GDP. Estimate 0.4%
  
• 8:30 Canadian RMPI. Estimate 2.3%
  
• 8:30 Canadian IPPI. Estimate 0.7%
• 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.2%
  
• 8:30 US Personal Spending. Estimate 0.2%. Actual 0.3%
  
• 8:30 US Personal Income. Estimate 0.3%. Actual 0.5%
  
• 9:45 US Chicago PMI. Estimate 55.1. Actual 54.2
  
• 10:00 US Revised UoM Consumer Sentiment. Estimate 102.0. Actual 100
  
• 10:00 US Revised UoM Inflation Expectations. Actual 2.9%
  
• 12:00 US FOMC Member William Speaks

*All release times are DST

*Key events are in bold

USD/CAD for Friday, May 31, 2019

USD/CAD, May 31 at 7:45 DST

Open: 1.3500 High: 1.3565 Low: 1.3494 Close: 1.3558

USD/CAD Technical

USD/CAD posted gains in the Asian session and the upward movement continues in European trade

• 1.3552 has switched to support after gains by USD/CAD on Friday. It is a weak line
• 1.3662 is the next resistance line
• Current range: 1.3552 to 1.3662

Further levels in both directions:

• Below: 1.3552, 1.3445, 1.3383 and 1.3290
• Above: 1.3662, 1.3771 and 1.3859

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