USD Continues To Remain Positive Ahead of GDP Results Tomorrow

US dollar which gained against six major currencies of the world post a boost in 10 year treasury yield since trading session began this Monday has managed to remain bullish across all currencies throughout this week. So far the Canadian Calendar doesn’t have any major impact news for the week other than speech by Bank of Canada Governor Poloz’s speech. Poloz’s remarks in public have thus far showed a dovish sentiment. The initial increase in CAD sells off started last week post Poloz’s dovish remark. Yesterday during his appearance before the Senate banking, trade and commerce committee in Ottawa Poloz mentioned that current economy seems positive after a long adjustment to a sharp fall in oil prices, but there are still softness in several areas of the country. He also said that interest rates are likely to rise from current low levels but it is expected to happen slowly in order to prevent creating risk to financial stability.

USDCAD in Range

The central bank has hiked three times since last July as the economy improves and the unemployment rate hovers around 40-year lows. BOC held rates steady last week at 1.25%, market operators see a roughly 70% chance of another hike by July. While increase in treasury yields have helped USD remain bullish across the week, Q1 GDP results are expected to be released tomorrow and reading is predicted to be downgraded from 2.9% to 2% which could be first sign that could help unsettle or slowdown US dollar’s uptrend momentum that has been ruling the market during since Monday morning.

Despite BOC governor Poloz’s speech on Wednesday which was widely expected to help CAD gain upper hand, the greenback remains strong over support from T-yields and even if there is a negative preliminary Q1 GDP reading tomorrow which could upset USD/CAD exchange rates for a short term, it will hardly cause any major impact as USD is expected to gain further bullish support from US income and personal spending data which are expected to come out with positive readings. A Higher levels of personal income and spending may eventually lead to rising retail activity in the US, along with an increase in reported GDP and hence USD is expected to continue moving upwards against CAD in long term despite Preliminary Q1 data to be released tomorrow.