USD/CAD: Canadian Dollar Improves Despite Soft Retail Sales

 | Feb 22, 2019 10:03

The Canadian dollar is steady in the Friday session. Currently, the pair is trading at 1.1390, down 0.32% on the day. On the release front, Canadian retail sales reports were soft, as expected. Core retail sales declined 0.5%,matching the estimate. Retail sales fell 0.1%, shy of the forecast of 0.0%. In the U.S., there are no data releases, but we’ll hear from a host of FOMC members, with the markets hoping for some insights into future monetary policy.

Risk appetite remains strong, as investors are optimistic that trade talks between the U.S. and China will yield a deal. Negotiations continued this week in Washington, but details have been hard to come by. The talks are reportedly making progress, as negotiators are preparing memorandums of understanding on key issues like cyber theft and intellectual property rights. Investors are hopeful that a March 1 deadline of higher U.S. tariffs can be avoided. The trade war between the two countries has weighed heavily on global growth, and the Canadian dollar could jump if there is a breakthrough in the talks.

The Federal Reserve minutes from the January meeting indicated that policy-makers remain dovish with regard to monetary policy. Investors were not surprised, and gold was unable to make any headway. Participants reiterated that the Fed will remain cautious, stating that a “patient approach to monetary policy” was appropriate. However, members added that if economic projections improved, the Fed could revise the “patient approach.” The minutes noted that the employment market had strengthened and economic activity was rising, but expected GDP in 2019 to slow down compared with 2018. We may not see a rate hike before the second half of the year, as the Fed has scaled back its forecast to two hikes this year, while the markets have priced in no rates hikes until 2020.

USD/CAD for Friday, February 22, 2019