Canadian Dollar at 3-Week High as Greenback Retreats

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The Canadian dollar has posted small gains in the Thursday session. Currently, USD/CAD is trading at 1.2908, down 0.10% on the day. On the release front, Canada releases ADP nonfarm employment change. In the U.S, the Philly Fed Manufacturing Index is expected to jump to 17.5 points, while unemployment claims are forecast to climb to 210 thousand. On Friday, Canada releases CPI, which is expected to post a rare decline.

On Wednesday, there were key events on both sides of the border. Canada released Manufacturing Sales, posting a gain of 0.9%, which was within expectations. Still, the indicator has weakened for a third straight month, which could raise concern about the strength of the manufacturing sector. In the U.S, construction numbers were a mixed bag. Building Permits disappointed, dropping from 1.31 million to 1.23 million. This was well short of the estimate of 1.31 million and marked the weakest gain since September. There was better news from Housing Starts, which jumped from 1.17 million to 1.28 million, above the estimate of 1.24 million. This was a three-month high. On Thursday, we’ll get a look at Existing Home Sales, which has been on a nasty downtrend, losing ground for four straight months. The indicator is expected to improve slightly, to 5.36 million.

U.S President Trump fired another tariff salvo earlier this week, and the Chinese have vowed to retaliate. This has become an all-too familiar script, which was repeated on Monday, as the U.S announced 10% tariffs on some $200 billion worth of Chinese goods. Only this time, investors didn’t panic and the Canadian dollar and other currencies have held their own against the greenback. Why have the currency markets reacted so calmly? Investors appeared to have been ready for a move by Trump, and may be sighing in relief that the tariff was set at 10% rather than at 25%. One senior economist summed up Trump’s most recent salvo as “bad but manageable”. However, if the Chinese do indeed retaliate and the U.S takes further measures, this would likely shake up the currency markets and boost the U.S dollar.
 
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