The Canadian dollar has lost ground for a second straight day. Currently, USD/CAD is trading at 1.2634, up 0.35% on the day. Earlier in the day, USD/CAD touched a high of 1.2674, its highest level since March 10th.
Canada’s GDP expected to rise
It’s been a quiet start to the week for USD/CAD, with no Canadian events. That will change on Wednesday, with the release of Canada’s GDP for January. The street consensus stands at 0.5%, which would be a strong rebound from the lethargic 0.1% gain a month earlier. A figure higher than the estimate would be bullish for the Canadian dollar.
We’ll also get a look at the Raw Materials Price Index, an important inflation gauge. The index is expected to show a strong gain of 5.3% for February, after a reading of 5.7% a month earlier. This reflects pent-up demand due to the Covid- 19 lockdowns in effect.
US yields boost the greenback
US yields are on the march, with the 10-year yield rising to 1.77% on Tuesday, its highest level in 14 months. The rise in yields comes a day before President Biden will announce parts of a proposed new infrastructure plan, Build Back Better, a massive spending program which will carry a price tag of between 3-4 trillion dollars. HSBC sent out a note saying that “stimulus and any infrastructure plan are likely to prove to be a sugar rush for the economy”.
Given that such a massive recovery program will trigger higher inflation, we could see bond yields continue to rise this week, which would likely prolong the dollar rally. Biden’s massive package will undoubtedly include tax hikes, which is likely to garner strong opposition from the Republicans.
- USD/CAD is putting pressure on resistance at 1.2641, followed by resistance at 1.2713
- On the downside, there is support at 1.2486. Below, there is support level is at 1.2403. This is followed by the 52-week low, at 1.2365
For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/