- The Loonie advanced 0.30% against the dollar amid increased risk appetite.
- Discussions between Russia and Ukraine would continue, although the fighting continues.
- Canadian inflation is approaching the 6% threshold, while US retail sales are moderating.
The USD/CAD falls for the second day in a row in the week, ahead of the FOMC monetary policy decision amid risk appetite in the market, as geopolitical jitters around Russia-Ukraine seem to ease. Lately, however, a contradiction between different news sources keeps traders on their toes, weighing the outcome in Eastern Europe after a three-week war so far. At press time, USD/CAD is trading at 1.2725, down 0.33%.
In tune with positive market sentiment, European and US stock indices continue to trade higher. By contrast, the CBOE Volatility Index (VIX), the so-called fear index, dipped below 28 for the first time since February 25, signaling increased investor appetite for riskier assets.
The US Dollar Index, a gauge of the dollar’s value against six rivals, is down 0.50% to 98.56 ahead of the Federal Reserve’s monetary policy meeting.
Talks between Russia and Ukraine “seem” to improve
Earlier in the day, sources quoted by the Financial Times said that Russia and Ukraine had made significant progress towards a possible 15-point peace plan that would include a ceasefire and a Russian withdrawal from Ukraine. The deal includes that Ukraine would not join NATO and would not host foreign military bases. Lately, however, Ukraine is reported to have rejected Russian claims that it was open to adopting a model of neutrality comparable to Sweden’s in peace talks, The Independent reported on Wednesday.
USD/CAD barely moved after this news; instead, traders focused on economic data from Canada and the United States. In Canada, inflation rose 5.7%, higher than the 5.5% annual estimate by analysts, while the core denomination, which excludes volatile indicators, rose 4.8%, higher than the 4.5% expected.
Canadian Inflation Approaches 6% Threshold and US Retail Sales Moderate in February
On the US docket, February Retail Sales increased moderately, reaching 0.3% vs. 0.4% monthly. Sales excluding automobiles increased 0.2%, down from 0.9% monthly. Notably, January data was revised upwards to show sales up 4.9% instead of the 3.8% previously reported.
At the end of the day, the Federal Reserve will reveal its monetary policy decision. Market participants are expecting a 25 basis point hike and are eagerly awaiting the dotted chart, which could guide subsequent rate hikes.
Technical levels
Source: Fx Street
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