USD to CAD Exchange Rate Edges Higher as Investors Await Trump Address

February 27, 2017 - Written by Frank Davies

STORY LINK USD to CAD Exchange Rate Edges Higher as Investors Await Trump Address

The US Dollar to Canadian Dollar exchange rate shed all of last week’s gains on Friday as Canada’s latest inflation results impressed. USD/CAD opened this week edging higher on Fed rate hike bets.

USD/CAD ultimately trended flatly last week, slipping from 1.3095 to 1.3091. When markets opened on Monday, USD/CAD edged higher to around 1.3113, where it trended at the time of writing.

USD Struggles to Capitalise on Fed Rate Hike Bets

Last week’s session was mixed for US Dollar movement.

Investors continued to await news and details of US President Trump’s economic and fiscal plans amid hopes that they could lead to economic stimulus for the US and add to pressures supporting 2017 interest rate hikes from the Federal Reserve.

However, as US PMI data published by Markit last week was disappointing and Trump remained silent on fiscal policy, the US Dollar’s strength has been limited.

The ‘Greenback’ remained pressured when markets opened on Monday, but it was able to edge higher against the ‘Loonie’ due to anticipation for a Presidential address from Trump due to take place on Tuesday.

CAD Weighed Down as Oil Prices See Continued Uncertainty

Demand for the Canadian Dollar slipped on Monday as the outlook for oil, Canada’s most lucrative commodity, remained uncertain.

Bullish bets that oil prices would rise hit a record high on Monday, showing that investors had confidence the commodity would continue to increase in price.

However, oil production continued to increase at a faster rate in the US, which capped the day’s increases in oil prices.

With investors increasingly concerned that oil prices may not see sustained gains in the short to long-term future, demand for the Canadian Dollar was mixed.

This was despite last Friday seeing a surprisingly strong Consumer Price Index (CPI) result from Canada, slightly increasing hopes that the Bank of Canada (BOC) would tighten monetary policy in the foreseeable future.

USD/CAD Forecast: Investors Hope for Economic News from Trump

The US Dollar to Canadian Dollar could see a more sustained advance in the coming week if the Tuesday’s Presidential address from US President Trump gives traders the economic news they’ve been hoping for.
On the campaign trail last year, Trump proposed fiscal policy from his government that would stimulate the economy quickly.

However, Trump has thus far left investors waiting. If Trump impresses with economic plans this week, this is also likely to increase Federal Reserve interest rate hike bets.

Tuesday will also see the publication of key US Gross Domestic Product (GDP) results for Q4 2016. Influential US PMIs from ISM will be published later in the week. These will support the US Dollar if they impress.

The Canadian Dollar, on the other hand, will react to shifts in the oil market as always. If Trump impresses on Tuesday and Fed rate hike bets increase, the ‘Loonie’ will also suffer from expectations that there will be higher 2017 interest rates just across the border.

Also vital to CAD movement this week is the Bank of Canada’s (BOC) latest policy meeting. If the bank indicates that inflationary pressures are up after last week’s impressive Canadian CPI prints, the Canadian Dollar could soar.

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