USD/CAD: Upbeat Powell and the US economic data support greenback
- The US Federal Reserve Bank President confirmed gradual rate hike outlook in support of the US Dollar.
- CAD is under pressure on Canadian oil glut and ongoing NAFTA uncertainty.
The USD/CAD is trading around 1.2760, during the morning session in New York jumping up 0.6% on an upbeat US consumer confidence data and ongoing NAFTA jitters for the Canadian economy. USD also got some boost after new Fed chair Powell said market volatility won’t stop more rate hikes in his first testimony and sounds more upbeat about inflation in his testimonial Q&A compared to the initial statement.
Overall, the US economic data were mixed on Tuesday with the upbeat US consumer confidence, but disappointing trade balance and duravble godds orders data.
On the other side, the CAD is under pressure on Canadian oil glut and ongoing NAFTA uncertainty. Although the fundamentals for Canadian economy remain strong, round 7 of NAFTA negotiations are not off to a good start.
A plan for Mexican President Nieto to visit US President Trump has been postponed indefinitely after Trump refused to publicly say that Mexico would not pay for a wall. There are reports that Trump lost his temper, prompting Nieto to cancel his trip. Concerns that Canada and NAFTA talks could end up a casualty in this crossfire weighed on the CAD as well.
Canada may be also affected by ongoing NAFTA uncertainty like the UK on Brexit, although to a much lesser extent. BOC has also warned that private capex decisions are being delayed because business wants clarity on trade. At the same time, US may be beneficiary of the ongoing NAFTA jitters as companies may be finding the US as the safest out of NAFTA countries.
All eyes may be now on Canadian budget later on the day and a deluge of Canadian economic data including GDP later in the week.
Technically, for the USD/CAD, the area of 1.2627 is now a vital support now and in that scenario, USDCAD may rally further towards 1.2755/1.2780-1.2912 zone in the coming days.