Forexpros – The U.S. dollar ended the week sharply higher against its Canadian counterpart on Friday, as ongoing concerns over the handling of the financial crisis in the euro zone supported demand for the safe haven greenback.
USD/CAD hit 1.0301 on Friday, the pair’s highest since October 12; the pair subsequently consolidated at 1.0275 by close of trade on Friday, gaining 1.94% over the week.
The pair is likely to find support at 1.0157, the low of November 15 and resistance at 1.0338, the high of October 11.
The greenback came under pressure on Friday, as market sentiment improved amid speculation that the European Central Bank may lend to the International Monetary Fund in order to bail out troubled euro zone economies.
Risk appetite also strengthened after newly-appointed Italian Prime Minister Mario Monti won a parliamentary confidence vote, giving him a mandate to begin drafting his agenda, which includes broader structural reforms.
Following the vote, Italian bond yields found support, falling back below the 7% threshold widely seen as unsustainable for borrowing in the long term. Spanish bond yields also eased after rising close to 7% at a government bond auction earlier in the week, as the ECB purchased Italian and Spanish government debt.
But the greenback’s losses were limited as investors remained concerned over the handling of the debt crisis in the single currency bloc, ahead of upcoming national elections in Spain.
Also Friday, official data showed that Canada’s core consumer price inflation rose more-than-expected in October, ticking up 0.3% after a 0.5% increase the previous month. Analysts had expected core CPI to rise 0.2% in October.
The greenback rallied against the loonie on Thursday after government data showed that U.S. building permits rose to the highest level since March 2010 in October, while U.S. housing starts were largely unchanged.
A separate report revealed that the number of people who filed for unemployment assistance in the U.S. in the week ending November 11 fell by 5,000 to a seven-month low of 388,000.
Meanwhile, the loonie also remained under pressure as light sweet crude futures for delivery in January traded at USD97.64 a barrel by close of trade on Friday, dropping 1.48% over the week, the first weekly decline since late September.
Raw materials, including oil account for about half of Canada’s export revenue.
In the week ahead, investors will be keeping a close eye on developments within the euro zone. Meanwhile, U.S. data on third quarter growth and durable goods orders will be closely watched, as well as a speech by Bank of Canada Governor Mark Carney.
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 Friday, as there are no relevant events on this day.
Monday, November 21
Canada is to produce government data on wholesale sales, an important indicator of economic health.
Meanwhile, the U.S. is to release industry data on existing home sales.
Tuesday, November 22
Canada is to publish official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.
Later Tuesday, the U.S. is to release preliminary data on gross domestic product, the broadest measure of economic activity and the leading indicator of the economy’s health. In addition, the U.S. Federal Reserve is to publish the minutes of its November policy meeting.
Wednesday, November 23
The U.S. is to publish a string of economic data, including a government report on durable goods orders, a leading indicator of production. The country is also to publish its weekly report on initial jobless claims, in addition to data on inflation, personal income, personal spending, crude oil stockpiles. This data can be a big market mover for the loonie due to the size of Canada’s energy sector. Meanwhile, the University of Michigan is to release revised data on inflation expectations and consumer sentiment.
Also Wednesday, Bank of Canada Governor Mark Carney is to speak; his comments will be closely watched for any clues to the future possible direction of monetary policy.
Thursday, November 24
Markets in the U.S. are to remain closed for the Thanksgiving holiday.
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