- USD/CAD is set to pare some of its weekly losses, with bulls targeting 1.3400.
- US Retail Sales plummet, down 1%m/m in March, while Industrial Production falls for the first time in 2023.
- One-year inflation expectations in the US soar 1%, from 3.6% to 4.6%.
He USD/CAD chains four days of consecutive losses and rebounds from weekly lows around 1.3300 early in the North American session. A series of US data shows the economy is feeling cumulative tightening from the US Federal Reserve (Fed), while consumer sentiment improved. USD/CAD is trading at 1.3366, above its opening price.
US consumer sentiment improved, but inflation expectations rose
The Canadian dollar (CAD) ran into headwinds, as Fed official Christopher Waller said further tightening is necessary amid a strong labor market and firmer core inflation due to consumer and producer side. US Retail Sales disappointed analysts and fell 1%m/m in March, versus a 0.4% contraction. The annual data was 2.9%, below the 5.9% of the previous month.
At the same time, the Fed revealed that March Industrial Production fell for the first time in 2023, expanding 0.4%m/m against estimates of 0.2%, and lagging February’s 0.9% data. Production fell due to a decline in durable goods.
Lately, the University of Michigan (UM) Consumer Sentiment Survey showed sentiment improving in April, from 62 to 63.5 points, although one-year inflation expectations increased 1%, from 3.6% to 4.6%. . This exacerbated the rise in US bond yields, with the two-year bond gaining ground, rising 13 basis points to 4.105%, supporting the dollar.
The Dollar Index, which measures the value of the dollar against six currencies, is turning 180 degrees, up 0.48% to 101,487 points.
Another Fed official, Chicago Chairman Austan Golsbee, said he would focus on tightening credit conditions and lending data when it comes to his decision for the next meeting on May 2-3. Golsbee added that while inflation is cooling, there is “clear stickiness: in some price categories.”
On the Canadian front, Statistics Canada revealed that manufacturing sales fell 3.6% in February, weighed down by sales of petroleum and coal products. Expectations were for a 2.7% decline, although the 14.8% drop in oil and coal products dragged the index lower.
USD/CAD Technical Analysis
Given the background, USD/CAD found some offers ahead of the weekend, although the upward correction towards the 200 day EMA at 1.3377 could be short-lived. If USD/CAD buyers recapture the 200 day EMA, this will expose 1.3400 and could shift the pair’s bias to neutral, with a daily close above the latter. Otherwise, USD/CAD sellers could step in and drag prices towards a year-long low of 1.3262, before falling to 1.3200.
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.
