USD CAD Exchange Rate Trends Jumps with Trump Poised to Unveil Budget Plans

February 28, 2017 - Written by David Woodsmith

STORY LINK USD CAD Exchange Rate Trends Jumps with Trump Poised to Unveil Budget Plans

The US Dollar to Canadian Dollar exchange rate continued to advance on Wednesday afternoon, hitting its highest levels since the beginning of January.

Demand for the US Dollar improved in the afternoon as February’s US manufacturing PMI from ISM came in well above expectations, rising from 56 to 57.7. The Canadian Dollar was little influenced by the afternoon’s Bank of Canada (BOC) policy decision. The bank left policy frozen and took a cautious and uncertain tone on Canada’s economic outlook.

[Previously updated 28/02/2017]

USD CAD Advance Triggered ahead of Trump Speech

The US Dollar’s rise against the Canadian Dollar today has come in the lull before a major speech from the US President.

A key piece of US data today has been negative, with quarterly GDP growth slowing to 1.9% in Q4.

However, the Chicago PMI and Richmond Fed manufacturing index have both rise in February, providing an additional boost to existing optimism about Trump’s potential policy dump.

Incoming Trump Speech could Shatter US Dollar Demand if Economic Plans are Over-Ambitious

Trump will remain in focus as a source of major US Dollar movement with his speech to the US Congress.

The main issue is expected to be Trump’s outlining of his policy plans for 2017 and beyond, which have so far been somewhat difficult to determine.

Fellow at the American Enterprise Institute Thomas Miller hasn’t been optimistic about the speech;

‘All of [Trump’s] actions and statements up to now have tended to err on the side of being vague or able to (be) read from several directions’.

Miller has been especially concerned about Trump’s designs on the Affordable Care Act (or ‘Obamacare’), stating that ‘I don’t think [solutions are] there yet’.

Trump himself has pledged to replace the act with ‘a solution that’s really…very good’, though whether it is good enough to prevent a panic-induced US Dollar crash remains to be seen.

CAD Drops on Crude Oil Cost Slide

With today’s limited Canadian data only showing a minor rise in producer prices, the more influential oil price movements have caused the latest CAD drop.

While a minor rise in the cost of crude came on Monday, the latest slide from over $54 per barrel to down around $53.43 has had a decisive negative impact on the Canadian Dollar.

CAD Demand Likely to Drop on Thursday if GDP Slowdown Forecasts are Accurate

While Wednesday afternoon will bring the Bank of Canada (BOC) interest rate decision, this is broadly expected to result in another rate freeze at 0.5%.

Fuelling such attitudes has been BOC Governor Stephen Poloz himself, who in response to speculation about an imminent US rate hike has said;

‘We would not expect to see Canada following the U.S. at this stage in terms of monetary policy’.

The more likely source of CAD movement this week will be Thursday’s Q4 GDP growth figures, which are expected to show a large annualised slowdown from 3.5% to 2.1%.

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