Canadian Dollar Update, April 7, 2021 – Canadian Dollar Under Pressure into FOMC Minutes
USD/CAD Open: 1.2599-04, Overnight Range: 1.2565-1.2616, Previous Close: 1.2569
WTI Oil is at $59.03 and gold is at $1,743.20. US markets are mixed today.
For today, USD resistance is at 1.2662. Support is at 1.2557.
• FOMC minutes highly anticipated
• IMF upgrades Global and Canada growth forecasts
• US dollar and EUR scraping out gains
The Canadian dollar dropped in Asia but clawed back most of the losses during the European session. Trading was erratic but lacked conviction. USDCAD climbed to 1.2616 from 1.2565 and is trading in Toronto at 1.2590. The gain is due to broad US dollar demand ahead of the FOMC minutes from March 17. Traders are concerned that the minutes may reveal a somewhat hawkish bias to Committee member views, in contrast to Fed Chair Powell’s dovish outlook.
The Summary of Projections released alongside the March 17 FOMC statement raised GDP growth forecasts. Four members penciled in a 25 bp rate hike in 2022. Mr. Powell insists that any rate hikes are “a long way off.”
He said he was concerned about the high unemployment rate and didn’t believe the unemployment rate accurately reflected the level of unemployment.
A series of Fed speakers since the March 17 repeated that the Fed would allow inflation to “run hot,” saying they were comfortable with a CPI above 2.0%
The International Monetary Fund (IMF) released their World Economic Outlook.
They upgraded the global growth forecast to 6.0%. They raised US growth to 6.4% from 5.1%, citing the strong policy response to the pandemic. Canada’s GDP forecast increased to 5.0% from 3.4% in January.
FX markets ignored the IMF news.
EURUSD climbed from 1.1865 to 1.1894 with prices underpinned by better than expected final readings for March Composite and Services PMI data. The topside may be capped if analysts determine that the FOMC minutes are more hawkish than expected. EURUSD is in a mild uptrend above 1.1850.
GBPUSD dropped then rallied inside a 1.3774-1.3838 band. The final reading of March Composite PMI was a tad weaker than forecast at 56.3, but traders ignored the result as they were still a seven-month peak. The UK government’s plans to lift coronavirus restrictions and bullish intraday technicals are supporting prices.
AUDUSD and NZDUSD were under pressure from broad US dollar demand as traders jockeyed for position ahead of the FOMC minutes.
Canada’s Merchandise Trade surplus is expected to narrow to $1.0 billion.
Today’s Suggested Range USD/CAD: 1.2550 – 1.2650