Forexpros – Last week saw the Canadian dollar trims gains against its U.S. counterpart on Friday, after rallying to a three-and-a-half-year high boosted by expectations for a near-term interest rate hike by the Bank of Canada.
USD/CAD hit 0.9422 on Thursday, a multi-year low; the pair subsequently consolidated at 0.9476 by close of trade on Friday, still down 0.71% on the week.
The pair is likely to find support at 0.9422, Thursday’s low and a three-and-a-half-year low and resistance at 0.9601, the high of July 19.
The Canadian dollar trimmed gains after data on Friday showed that Canadian consumer price inflation slowed to 3.1% in June from an eight-year high of 3.7% the previous month.
Core inflation, which excludes volatile items such as gasoline, unexpectedly slowed to a 1.3% pace in June from May’s 1.8%. Economists forecast it would accelerate to 1.9%.
The report said the decline in the annual inflation rate was mainly due to a 3.1% drop in passenger vehicle prices that was due to “larger discounts given by some manufacturers.”
Earlier in the week, expectations for a near-term rate hike by the BoC were bolstered after the bank’s rate statement said that monetary stimulus “will be withdrawn.” The rate statement omitted the word “eventually” that had been contained in previous releases.
The Canadian dollar was supported by data showing that retail sales rose 0.1% in May, better than expectations for a 0.3% decline, as gasoline receipts were the highest in almost three years and building material and gardening store sales rose 3.3%.
In the week ahead, as concerns over the sovereign debt crisis in the euro zone recede, investors will be focusing on U.S. efforts to agree on a USD3 trillion deficit-reduction plan, amid fears over a potential default ahead of the August 2 deadline to raise the country’s USD14.3 trillion debt ceiling.
Markets will also be looking towards Friday’s data on U.S. second quarter gross domestic product, in order to gauge the strength of the U.S. economic recovery.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday, as there are no relevant events on this day.
Tuesday, July 26
The U.S. is to publish government data on new home sales, a leading indicator of economic health, as well as data on consumer confidence and house price inflation.
Wednesday, July 27
The U.S. is to publish official data on durable goods orders, a leading indicator of production, as well as government data on crude oil stockpiles. This data can be a big market mover for the Canadian dollar, due to the size of Canada’s energy sector.
Later in the day, the Federal Reserve is to publish its Beige Book, which contains data the bank looks at when making its next interest rate decision.
Thursday, July 28
The U.S. is to release government data on initial jobless claims, a leading indicator of economic health, as well as industry data on pending home sales.
Friday, July 29
Canada is to publish official data on GDP, the broadest measure of economic activity and the primary gauge of the economy’s health. The country is also to publish government data on raw material price inflation, a leading indicator of consumer inflation.
The U.S. is to round up the week with preliminary data on second quarter GDP, as well as a preliminary report on the GDP price index and an employment cost index. The U.S. is also to publish data on manufacturing activity in the Chicago area, while the University of Michigan is to publish revised data on consumer sentiment and inflation expectations.
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