USD/CAD is showing little movement in the Thursday session. Currently, the pair is trading at 1.3268, up 0.09% on the day. On the release front, Canada releases manufacturing production, which is expected to rebound with a gain of 0.3%, after two successive declines. In the U.S., it’s a busy schedule. the markets are braced for a slowdown in consumer spending. Retail sales and core retail sales are expected to dip in January, with readings of 0.1% and 0.0%, respectively. PPI is forecast to post a gain of 0.1% and preliminary UoM consumer sentiment is expected to climb to 93.3 points. On Friday, Canada releases foreign securities purchases and the U.S. posts UoM consumer sentiment.
Investors are feeling more optimistic over the U.S-China trade war. On Thursday, China announced that exports had jumped 9.1% in January on an annualized basis, compared to the forecast of -3.2%. This was a strong rebound from December, when exports fell 4.4%. Talks between the U.S. and China are continuing, and the big question is will President Trump suspend the March 1 deadline to impose new tariffs on China. The U.S. has threatened to raise tariffs on some $200 billion of Chinese goods from 10% to 25%, but Trump has said he could let the deadline pass if there is progress in the talks. Risk appetite has improved this week, but the Canadian dollar has failed to make any headway against the greenback.
Taking a page out of the Federal Reserve’s playbook, the Bank of Canada has become more dovish, after raising rates three times in 2018. The BoC is expected to stay on the sidelines at its next policy meeting in March 6. The Canadian economy is being hampered by the global trade war, which has reduced the demand for Canadian exports. Weak oil prices have also weighed on the economy and kept inflation at low levels. The Canadian dollar is under pressure, and has lost close to 1.0% in February.
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