CAD Gains Post BOC Governor Poloz Speech

USDCAD has been on the swing since trading session began for the week in response to positive economic reading in Canada while US saw mixed outcome in their end. The pair however has maintained its momentum of the price swing well within support region of last 10 trading sessions. USDCAD is currently trading at 1.28257 with Canadian Dollar continuing to gain strength during early hours of today’s trading session. This increase in momentum in CAD’s favor can be viewed as a result of better than expected GDP readings for Canada and Poloz’s speech in Yellowknife.

USDCAD Corrects Lower

US President Trump has extended exemptions for steel and aluminum tariffs for Canada and Mexico for another 30 days. The exemptions come at a sensitive time, with the US, Canada and Mexico neck deep in negotiations over a new NAFTA trade agreement. The talks have made significant progress, but the critical auto pact remains a stumbling block. It is likely that a tentative agreement will be hammered out, perhaps later this month. The Bank of Canada has dropped strong hints that it plans to raise interest rates later this year, but policymakers would like the NAFTA issue to be resolved before the next rate hike.

Canada’s economy has got back on its feet from –0.1% in the previous period, where one of the main reasons for such a rebound was extraction in oil and gas. The current GDP reading for Canada is at 0.4% while the expectations were at 0.3%. While CAD saw a steep bearish hit earlier last month due to dovish comments from Poloz, traders have got a renewed hope for interest rate hike post BOC governor’s speech in Yellowknife about house hold debt where he mentioned “the economy is operating at near full capacity and that higher interest rates will be required over time”.

While the speech saw governor’s stance as cautious approach he also clearly mentioned that economic progress in Canada has had stellar growth warranting hike in interest rate overtime while some monetary policy accommodation will still be needed. This adjustment will be made after carefully observing how households and the entire economy are affected / reacting to higher interest rate thus confirming sure possibilities of hike in interest rate in near future. In regards to USD, ADP non-farm employment data  and FOMC statement released later today is expected to help USD regain momentum in short term. Expected support and resistance for the pair are at 1.27590 & 1.30028 respectively.