The US dollar was well matched by the Canadian dollar in the previous session. The US dollar Canadian dollar exchange rate closed Tuesday’s session flat at 1.3162. The pair is advancing in early trade on Wednesday.
The US dollar was broadly in favour in the previous session as risk appetite eased and as investors digested better than forecast US manufacturing production data.
US manufacturing production rebounded strongly in November, increasing 1.1% month on month. This was well above the 0.7% increase that analysts had forecast. The increase was partly owing to GM factory workers returning to work after a 6-week strike. However, even removing the impact of the returning striker’s production was still higher. Investors are cautiously optimistic that the manufacturing sector, which makes up 11% of the US economy could be starting to recover after being negatively impacted by the 17-month long US — China trade dispute.
Risk sentiment is also waning as no deal Brexit returns to the table and as investors grow sceptical over the US — China trade deal. With so few details on the agreement investors are struggling to asses how far reaching it is.
Today there is no high impacting US data due for release. Trump’s impeachment trial is not expected to have an implication for the dollar. This is because the Senate vote is unlikely to get the two thirds majority required to oust the President.
Canadian inflation To Drive Loonie
The Canadian dollar showed resilience in the previous session amid weak factory orders data and a rising oil prices. Canadian factory sales decreased 0.7% month on month in October as Canada felt the knock-on effect of the United Auto strike in the US which weighed on transportation equipment sales
Canada’s inflation report is due today, which could help guide expectations for the Bank of Canada interest rate outlook. Overall the Canadian economy remains solid. There was a hiccup in labour data last week, when unemployment jumped to 5.9% up from 5.5%. This raised a question as to whether this was just a blip in an otherwise healthy market or whether this was the start of a downward trend. Either way, investors are confident that the Bank of Canada won’t cut rates soon.