USD/CAD is declining on Friday, though it might step into the bullish territory soon as it is moving away from the daily low right now. Currently, the pair is trading at 1.3254, down 0.10% as of 8:10 AM UTC. The rate touched a daily low at 1.3246.
The greenback has been supported by inflation data for several hours, but the US dollar is still under pressure as investors fear that the US economy will suffer from the global slowdown, especially amid the coronavirus outbreak.
Yesterday, the US Labor Department said that the consumer price index excluding food and energy components (Core CPI) increased by 0.2% in January after a 0.1% rise in December, in line with analysts’ expectations. The inflation was driven by increases in the prices of clothing, rents, airline tickets, recreation, healthcare, and education. In the 12 months through January, the indicator rose 2.3%.
The inflation target of the Federal Reserve is 2%. Earlier this week, Fed Chair Jerome Powell told the Congress that the economy was performing well.
“Over the next few months, we expect inflation to move closer to 2%, as unusually low readings from early 2019 drop out of the 12-month calculation,” he explained.
Last month, the Fed left the interest rates unchanged. Economists now expect the central bank to maintain its monetary policy on hold until the end of 2020 after it cut the rates three times last year. Inflation will probably stabilize amid modest wage growth.
The Labor Department said yesterday that the number of US citizens filing for unemployment benefits rose less than expected last week ended February 8. This adds to the hopes that the strengthening labor market would continue to support the US economic expansion.
Initial jobless claims increased by 2,000 to a seasonally adjusted 205,000 last week, while analysts anticipated an increase to 210,000.
The four-week moving average, which is regarded as a more accurate measure as it smoothes volatility, remained unchanged at 212,000.
Later today, the exchange rate between USD and CAD might become even more volatile as the US will release a series of economic updates, including retail sales, industrial production, manufacturing production, business inventories, import and export prices, and the consumer sentiment, among others.
