USD/CAD: Dollar Drops On Trade Outlook & Fed /Trump Meeting

After losing traction across the US session, the US dollar ended Monday 0.2% lower versus the Canadian dollar. The pair retreated to 1.3200 on broad US dollar weakness. The pair is holding steady in early trade on Tuesday.

The dollar slipped to fresh session lows in the US session on Tuesday amid growing scepticism over a US — China trade deal and following a statement from the Federal Reserve that Fed Chair Jerome Powell met with US President Trump and US Treasury Secretary Steven Mnuchin. Trump said in a tweet that the trio discussed the economy, unemployment, interest rates, negative interest rates, low inflation, easing and dollar strength. The meeting comes following relentless criticism from Trump over central bank monetary policy and the subsequent value of the dollar.

The dollar dropped because investors are concerned that Trump is trying to exert pressure on the Fed to ease monetary policy further in an attempt to weaken the dollar. The Federal Reserve Chair Powell continues to insist that the Fed is independent and any decisions that it takes over monetary policy are based entirely on information that bears on the outlook of the economy.

Looking ahead there is no high impacting US data today. Investors could glance briefly at mid-tier US building permits and home starts data. Wednesday sees the release of the minutes to the latest Federal Reserve monetary policy meeting. This could cause some volatility in the dollar, should the Fed disappoint with a very neutral tone.

Canadian Dollar Struggles On Weaker Oil

The Canadian dollar was unable to capitalise further on the weaker dollar because oil prices also declined on the latest trade headlines. Reports that China was turning more sceptical over the prospect of a phase one trade deal after the US refused to roll back trade tariffs weighed on demand for oil. The mood in the markets soured and a barrel of oil, West Texas Intermediate (WTI)dropped below $57. This made it difficult for the commodity related Canadian dollar to gather strength.

Investors could look towards Canadian manufacturing sales, which analysts forecast will fall month on month in September, potentially pulling to Canadian dollar lower. However, investors will pay more attention to Wednesday’s inflation report. Canadian inflation is expected to increase 0.3% month on month in October, up from a -0.4% decline in September. A lift in inflation could strengthen the Canadian dollar.

Currencylive.com is a news site only and not a currency trading platform.

Currencylive.com is a site operated by TransferWise Inc. (“We”, “Us”), a Delaware Corporation. We do not guarantee that the website will operate in an uninterrupted or error-free manner or is free of viruses or other harmful components. The content on our site is provided for general information only and is not intended as an exhaustive treatment of its subject. We expressly disclaim any contractual or fiduciary relationship with you on the basis of the content of our site, any you may not rely thereon for any purpose. You should consult with qualified professionals or specialists before taking, or refraining from, any action on the basis of the content on our site. Although we make reasonable efforts to update the information on our site, we make no representations, warranties or guarantees, whether express or implied, that the content on our site is accurate, complete or up to date, and DISCLAIM ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Some of the content posted on this site has been commissioned by Us, but is the work of independent contractors. These contractors are not employees, workers, agents or partners of TransferWise and they do not hold themselves out as one. The information and content posted by these independent contractors have not been verified or approved by Us. The views expressed by these independent contractors on currencylive.com do not represent our views.