Forexpros – Last week saw the U.S. dollar fall below parity against its Canadian counterpart for the first time in three months after the Federal Reserve pushed back expectations for an interest rate hike, sparking a broad dollar selloff.
USD/CAD hit 0.9981 on Thursday, the pair’s lowest since November 1; the pair subsequently consolidated at 1.0016 by close of trade on Friday, shedding 1.23% over the week.
The pair is likely to find support at 0.9913, the low of October 31 and resistance at 1.0099, the high of October 24.
The greenback came under broad selling pressure on Wednesday after Federal Reserve Chairman Ben Bernanke pushed back the timing of a possible interest rate increase until late 2014 and indicated that the bank may embark on a third round of quantitative easing.
The bank had previously pledged to leave interest rates close to record lows until mid-2013.
Risk appetite was also boosted by hopes for an agreement between Greece and its creditors on a debt swap deal to avoid default.
But the Canadian dollar retreated from parity on Friday after official data showed that the U.S. economy grew more slowly than expected in the fourth quarter of 2011.
The Commerce Department said U.S. gross domestic product expanded by 2.8% in the three months to December, the fastest quarterly rate in one-and-a-half years, but disappointing expectations for an increase of 3%.
The U.S. is Canada’s largest trading partner.
But the loonie remained supported as the weaker greenback pushed oil prices higher, with the crude oil contract for delivery in March advancing more than 2% over the week, setting at USD99.71 a barrel by close of trade on Friday.
Raw materials, including oil account for about half of Canada’s export revenue.
In the coming week, investors will be closely watching developments in Greece as well as the outcome of Monday’s European Union summit. Also Monday, Italy is to hold an auction of long term government bonds, in what will be an important test of demand for the country’s debt.
In addition, the U.S. is to publish data on service and manufacturing sector growth while Friday’s data on non-farm payrolls will be an important gauge of the recovery in the labor market.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, January 30
The U.S. is to publish government data on personal consumption expenditure, a leading indicator of inflation, followed by data on personal spending, which accounts for a majority of overall economic activity.
Tuesday, January 31
Canada is to release official data on GDP, the broadest measure of economic activity and the primary gauge of the economy’s health, as well as a report on raw materials price inflation, a leading indicator of consumer inflation.
The U.S. is to produce government data on employment cost inflation, a key gauge of consumer inflation, followed by industry data on house price inflation and the purchasing managers’ index in Chicago. The country is also to release data on consumer confidence.
Wednesday, February 1
The U.S. is to release industry data on non-farm employment change, an important indicator of consumer spending. The country is also to produce a report by the Institute for Supply Management on manufacturing activity, followed by government data on crude oil stockpiles.
Thursday, February 2
The U.S. is to produce government data on unemployment claims as well as preliminary data on nonfarm productivity and unit labor costs. Later in the day, Fed Chairman Ben Bernanke is to testify on the economic outlook and federal budget situation before the house budget committee.
Friday, February 3
Canada is to produce official data on employment change and on the country’s unemployment rate.
The U.S. is to round up the week with official reports on non-farm employment change and the country’s unemployment rate. The country is also to release official data on average hourly earnings and factory orders, as well as a report by the Institute for Supply Management on service sector activity.
Forexpros
