Loonie Tends to Keep falling on Lower Chance of Rate Hike
By: Eddy Peng Mar 15, 2018
Canadian dollar is holding on its current level near C$1.29622 per U.S. dollar. The USD/CAD declined roughly 0.09 percent to close at 1.29525, whose intraday price was supported by Dec.19’s high of 1.29200, after a dramatic rise on the previous day.
U.S. President Donald Trump had picked Larry Kudlow, a U.S. television commentator and conservative economic analyst, to replace Gary Cohn as the top White House economic adviser. Kudlow, an informal advisor to Trump’s 2016 presidential campaign and also worked on Wall Street, had criticized the president’s decision, saying tariffs would harm steel-consuming producers.
U.S. retail sales dropped for a third straight month in February as households cut back on purchases of motor vehicles and other big-ticket items, prompting analysts to downgrade their first-quarter economic growth forecasts.
Now let’s turn our eyes on Canada. Earlier this week, Stephen Poloz, Chief of the Bank of Canada gave a speech and likely took a potential April hike from the BoC off the table. His focus was on untapped potential or ‘slack’ in the labor market has not been realized, which a higher rate hurting the possibility of the potential being realizing. In this case, a lower probability of rate hike may lead to depreciation of the loonie in the long run.
USD/CAD has again traded into critical resistance this week between 1.29195 and the psychologically critical 1.3000 without breaching the later. Momentum would favor a breakout higher, which would like signal a regime shift toward a stronger USD, at least against the Canadian Dollar.
If the pair keeps a rising momentum, it will be approaching a yearly resistance which starts from early 2016, meaning that there will be a large room to earn profits from this gap.
Chart 1: USDCAD Daily
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