The Canadian dollar has started the week with slight gains. In the North American session, USD/CAD is trading at 1.2271, down 0.16% on the day.
The week started in fine form, as Canada’s manufacturing PMI for April pointed to robust growth, with a reading of 57.2. Although this was down a bit from the March read of 58.5, the index remained well into expansionary territory.
Canadian dollar enjoys banner week
It was an outstanding week for the Canadian dollar, which posted gains of 1.47%. This marked its best weekly performance since November.
The loonie was lifted by an excellent retail sales report in March, as the headline and core readings both posted gains of 4.8%. Both of these readings come after the year started on a sour note, with declines in January and February.
Canada’s economy cooled in March, with a gain of 0.4%. This was down from the February reading of 0.7% and shy of the forecast of 0.5%, but investors didn’t seem to mind, and USD/CAD was barely changed on Friday. A roaring US economy has boosted risk sentiment, which has boosted commodity currencies such as the Canadian dollar.
Will Fed reconsider a QE taper?
The Federal Reserve has sought to dampen any speculation about tapering its QE program anytime soon, insisting that the economy still requires that it keep its foot on the (stimulus) pedal. At the FOMC meeting last week, Fed Chair Powell stated, in response to a direct question, that it was premature to taper the Fed’s bond purchases.
Enter Fed Governor Robert Kaplan, who just two days after Powell’s remarks, publicly questioned them. Kaplan, who is not a voting member, made headlines when he urged the Fed to start talking about its asset-purchase program. The Dallas Fed Governor warned of imbalances in financial markets, with the economy rebounding from the Covid downturn faster than anticipated.
With the US economy well on the way to recovery, there are likely other Fed voices in addition to Kaplan who would like to see the Fed revisit the question of tapering QE sooner rather than later.
- On the upside, there is resistance at 1.2435 and 1.2575
- There is support at 1.2210 and 1.2125
For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/
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