USD/CAD Exchange Rate Trending Narrowly Following Earlier Canadian Dollar Rise
After spending the morning rising against the US Dollar the Canadian Dollar’s progress has since been halted.
Traders are profiting on a strong US Dollar today following the publication of the minutes from the last Federal Open Market Committee (FOMC) gathering. The minutes reinforce the generally hawkish statements made by Fed members and suggest that the US is still on track for a rate hike in December. This has allowed the ‘Loonie’ to advance, although recently released Wholesale Sales figures for September have held steady at -0.1% and the CAD/USD exchange rate has slowed.
The USD/CAD exchange rate is currently trending around 1.3293.
Positive Housing Market Data Pushes USD/CAD Exchange Rate Up
The release of US housing market figures has seen the USD/CAD trending up after a slow morning. While Month-on-Month (MoM) Housing Starts were down -11.0%, Mortgage Applications were up 6.2% after last month’s -1.3% fall. The number of housing permits awarded each month rose from 1105k in September to 1150k in October.
The new data has seen the USD/CAD exchange rate rise by 0.2% to trend around 1.3338.
The USD/CAD exchange rate is currently experiencing little movement, with the ‘Buck’ (USD) slightly down against the ‘Loonie’ (CAD). Trader profit-taking has reduced demand for the US Dollar, while long-term concerns regarding global oil oversupply are preventing the Canadian Dollar from making notable gains.
USD/CAD Exchange Rate Trending Narrowly Ahead of Key December Fed Rate Hike Decision
The Federal Open Market Committee (FOMC) interest rate decision in December has been the key focus for investors since October’s policy meeting. Strong US Non-Farm Payroll figures, Retail Sales and yesterday’s Consumer Price Index data has all-but cemented the likelihood the Fed will act, with the probability of a rate hike rising to 66%. This has seen the US Dollar remain strong, although there was a dip before yesterday’s data as traders waited to see the figures.
The USD/CAD has likely remained flat today because of the uncertainty of Fed behaviour in the future. With December’s rate hike increasingly likely, investors have turned their attention further afield. How much interest rates are increased by next month is seen by many to be less important than the path they will take in 2016. Two of the FOMC’s most hawkish members, Jeffery Lacker and James Bullard, have stated that future interest rate hikes will not necessarily follow a predetermined path, nor do they have to be gradual increases.
On the other side of the debate, economists have pointed out that a rate hike in December doesn’t mean that the Fed will continue with an upward trend. The FOMC always has the option to cut rates again should future economic data suggest poor performance. ‘You do want to be data-dependant, but you want to be data-dependant in both directions,’ said Miles Kimball, an economist at the University of Michigan. ‘No one is mentioning the possibility that if the economy ends up doing worse, that the Fed can reverse course. If you’re really and truly data-dependant, it shouldn’t be a shocking thing if you make your target rate go up by a quarter point and then at the next meeting, if bad news comes, cut it back down.’
The USD/CAD exchange rate is currently experiencing little movement, trending in the region 1.3316.
Canadian Dollar Unable to Make Gains on US Dollar as Manufacturing Fails to Cover Oil Gap
Low oil prices are predicted to continue for several years before making a recovery. The news is likely to have a long-term effect on the Canadian economy and currency. The Bank of Canada had previously posited that a weak currency could help other sectors to grow, filling in the gap caused by a weakening global demand for oil. However, Manufacturing Shipments data for September showed an accelerated rate of contraction at -1.5%.
Oil is currently down more than 50% on the levels of June 2014, with a growth in the number of barrels being pumped per day of 720,000 causing rising stockpiles and a weakening demand. Yesterday saw a slight rise in prices, as the possibility of NATO intervention in the Middle East cast doubts over the future global oil supply.
The CAD/USD exchange rate is trending narrowly between 0.7496 and 0.7517.
USD/CAD Exchange Rate Forecast: Minutes of October FOMC Meeting Key for US Dollar
It is predicted that 2016 will see a surplus of 560,000 barrels per day if the Organization of the Petroleum Exporting Countries (OPEC) continues pumping oil at October’s rate of 31.38 million bpd. A pessimistic view of long term oil market could detrimentally affect the ‘Loonie’ in the long term.
US housing statistics are likely to see some movement for the ‘Greenback’ (USD), although the key release for investors will be the Minutes of the October 27-28 FOMC Meeting, due out during today’s North American session.
USD/CAD exchange rate is trading between 1.3295 and 1.3331.