Forexpros – The U.S. dollar was lower against its Canadian counterpart on Friday, as guarded hopes for fresh steps to tackle the debt crisis in the euro zone boosted investor demand for riskier assets.
USD/CAD hit 1.0298 on Friday, the pair’s highest since June 14; the pair subsequently consolidated at 1.0243 by close of trade, still up 0.36% on the week.
The pair was likely to find support at 1.0158, the low of June 20 and resistance at 1.0298, Friday’s high.
Market sentiment found support on Friday, after the European Central Bank relaxed rules on collateral for central-bank loans.
Meanwhile, German Chancellor Angela Merkel and the leaders of France, Italy and Spain agreed to push for a EUR130 billion growth package for struggling euro zone economies at a European Union summit beginning next week.
The Canadian dollar had weakened against the greenback earlier in the session after disappointing domestic inflation data saw investor’s trim back expectations for a near-term rate hike by the Bank of Canada.
Canadian consumer price inflation declined by 0.1% in May, bringing the annualized rate of inflation to 1.2%, following a 2% increase the previous month. Core CPI, which excludes volatile food and energy costs, rose at an annualized rate of 1.8%, just short of expectations for a 1.9% increase.
The greenback rallied against the Canadian dollar on Thursday after reports showing weak U.S. manufacturing activity, a shrinking Chinese manufacturing sector and slowing business activity across the euro zone bolstered demand for safe haven assets.
The greenback also found support after the Federal Reserve extended its current monetary easing program, but refrained from implementing more aggressive measures to bolster growth following its policy meeting on Wednesday.
The Fed announced that it is extending the current bond buying program, known as “Operation Twist”, until the end of this year and said it was ready to do even more to help support the fragile economic recovery.
The U.S. central bank also revised down its forecast for growth for 2012 and reiterated plans to keep short-term rates at record lows until at least late 2014.
In the week ahead, investors will be focusing on the upcoming EU summit amid growing expectations for progress on greater fiscal integration and allowing the bloc’s rescue funds to buy government debt.
Meanwhile, the U.S. is to release official data on inflation, manufacturing output and new home sales.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, June 25
The U.S. is to release official data on new home sales, a leading indicator of economic health.
Tuesday, June 26
The U.S. is to release industry data on house price inflation, a leading indicator of the housing sector’s health. The country is also to produce a report on consumer confidence.
Wednesday, June 27
The U.S. is to publish official data on durable goods orders, a leading indicator of production, as well as industry data on pending home sales and a government report on crude oil stockpiles.
Thursday, June 28
In the euro zone, EU leaders are scheduled to hold the first day of talks at an economic summit in Brussels.
Meanwhile, the U.S. is to release government data on initial jobless claims, followed by revised data on first quarter gross domestic product, the broadest measure of economic activity and the primary gauge of the economy’s health.
Friday, June 29
Canada is to publish official data on GDP, as well as data on raw materials price inflation, a key indicator of consumer inflation.
Meanwhile, EU leaders are to hold a second day of talks in Brussels.
The U.S. is to round up the week with official data on consumer price inflation and personal spending, followed by a report on the purchasing managers’ index in Chicago and revised data from the University of Michigan on consumer sentiment.
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