Canadian Dollar: Calm Ahead Of Inflation And FOMC

The Canadian dollar is almost unchanged on Wednesday. In the European session, is trading at 1.2181, down 0.05% on the day.

This tranquil scene could change drastically later in the day, with two key events on the calendar. Canada will release May (12:30 GMT). This will be followed by the FOMC policy (15:00 GMT). Either of these events are potential market-movers which could shake up the sleepy Canadian dollar.

Inflation has been the buzz word recent weeks, as the reopening of major economies has led to stronger economic activity and higher inflation. This has been the case in the US over the past two months, and earlier today, UK jumped to 2.1%, above the BoE’s target of 2 per cent.

In Canada, inflation is also running high. May CPI is expected to rise 0.4% CPI and 3.5% y/y, well above the BoC’s target of 2%. The central bank has already tapered its QE programme, and if CPI remains at high levels, it may have to consider a rate hike to rein in inflation.

The CPI inflation release will be followed by the FOMC policy meeting. Policymakers are not expected to make any adjustments to monetary policy, but the strong recovery and higher inflation have raised expectations that the Fed is becoming open to the idea of tapering its massive stimulus programme. The messsage from the FOMC could have a significant impact on the US dollar. If the Fed adheres to its ultra-loose stance, the greenback could retreat. However, any acknowledgments that taper talks could be on the table would likely lift USD/CAD past the 1.22 level.

USD/CAD Technical

USD/CAD Daily Chart
  • There is resistance at 1.2210. The next resistance line is at 1.2253
  • USD/CAD has support at 1.2090. Below, there is support at 1.2013

Original Post

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

(Visited 5 times, 1 visits today)