The Canadian dollar started the New York session nearly unchanged from Tuesday’s close but has since eked out small gains. The U.S. dollar is paring its overnight gains in cautious, low-volume trading.
The Canadian dollar is benefitting from a jump in West Texas Intermediate (WTI) oil prices, which have risen nearly 5% since Monday. The rally occurred despite the Organization of the Petroleum Exporting Countries moving forward with plans to raise production quotas at the beginning of May. The American Petroleum Institute (API) reported U.S. crude inventories rose 4.3 million barrels in the week ending April 23.
The negatives were offset by reports Goldman Sachs analysts raised their oil price and demand forecasts for 2021 due to predictions for a robust global post-pandemic economic recovery. The rise in oil prices put a cap on Canadian dollar losses.
Bank of Canada Governor Tiff Macklem reiterated his positive outlook for the domestic economy in testimony to the House of Commons Finance Committee, Tuesday. He said, "we are expecting strong consumption-led growth in the second half of this year. Fiscal stimulus from the federal and provincial governments will also make an important contribution to growth. Strong foreign demand and higher commodity prices are expected to drive a solid rebound in exports and business investment, leading to a more broad-based recovery. We now project that the economy will grow by around 6.5% this year, about 3¾ percent in 2022 and 3¼ percent in 2023."
His remarks were nearly identical to his opening statement at last week’s Monetary Policy Report press conference. Still, they were enough to remind traders that Canada may be the first G-10 country to raise interest rates in the post-pandemic world.
The Canadian dollar is unlikely to get much traction from today’s March Retail Sales data.
Economists forecast a gain of 4.0% compared to February’s 1.1% drop. However, renewed COVID-19 restrictions suggest the gain will be reversed in April.
This afternoon’s U.S. Federal Open Market Committee (FOMC) meeting is expected to be tame as policymakers maintain their “wait-and-see” approach.
President Biden addresses Congress tonight at 9:00 pm ET to announce his latest $1.8 trillion spending plan. Mr Biden wants to allocate more money to families and pay for this generosity by raising taxes on incomes above $400,000.
U.S. 10-year Treasury yields spiked to 1.64% from 1.58% yesterday and that move gave the US dollar a bid.
EUR/USD and GBP/USD drifted lower with EUR/USD losses exacerbated by weaker than expected German Confidence data. AUD/USD dropped following a soft inflation report and was the weakest G-10 major currency overnight.
There are not any top-tier economic reports from the U.S. or Canada today
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
