FX TALKING POINTS:
BULLISH USD/CAD SEQUENCE CONTINUES TO TAKE SHAPE AHEAD OF BANK OF CANADA (BOC) TESTIMONY. ALL EYES ON GOVERNOR STEPHEN POLOZ.
USD/CAD struggles to extend the recent series of higher highs and lows even as the Bank of Canada (BoC) strikes a cautious tone in front of lawmakers, and the pair may stage a larger pullback over the coming days should fresh data prints coming out of the U.S. economy undermine the Federal Open Market Committee’s (FOMC) scope to extend the hiking-cycle.
The testimony with BoC Governor Stephen Poloz suggests the central bank remains in no rush to implement another rate-hike as ‘some degree of monetary policy accommodation will likely still be needed to keep inflation on target,’ and the wait-and-see approach may continue to generate headwinds for the Canadian dollar as the FOMC pledges to implement higher borrowing-costs over the coming months.
With that said, the limited reaction to the better-than-expected U.S. Consumer Confidence survey keeps the Gross Domestic Product (GDP) in focus as the fresh updates are expected to show a downtick in the growth rate, but a material pickup in the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, may ultimately boost the appeal of the greenback as growth starts to exceed the 2% target.
USD/CAD DAILY CHART
- Lack of momentum to extend the bullish sequence may