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CAD rallies on US consumer confidence

Started by PocketOption, May 18, 2022, 06:18 am

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PocketOption

CAD rallies on US consumer confidence

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The Canadian dollar is unchanged on Monday, as it trades at the 1.29 line.


Weak US consumer confidence boosts Canadian dollar


The Canadian dollar ended the week in splendid fashion, with gains of over 1 per cent. This marked the Canadian dollar’s best one-day performance this year and recovered all of the week’s losses. The strong gains were driven by a disappointing UoM Consumer Sentiment index for May, which dropped to 59.2, down sharply from 65.2 in April and the lowest since October 2011. Just one year ago, the index was 82.8, indicative of a massive erosion in the confidence levels of the US consumer.


Consumers were more pessimistic about current and future expectations, and inflation expectations remained at 5.4% for a third straight month, a 40-year high. A fall in consumer confidence has so far not spilled over to consumer spending, but soaring inflation could cause consumers to cut back on spending, which would hurt economic growth.


Canada posted some solid numbers earlier today, although that wasn’t enough for the Canadian dollar to extend Friday’s impressive gains. Housing Starts and Wholesale Sales improved and were stronger than expected. Manufacturing Sales rose 2.5% in March, crushing the estimate of 1.7%. Oil and metal sales rose, reflective of high commodity prices, which is bullish for the commodity-based Canadian dollar.


Canada’s tightening job market is putting further pressure on the Bank of Canada to raise rates at a faster pace than expected. The benchmark rate is currently at an even 1.00%, after the 0.50% hike in April. Governor Macklem has hinted that he could deliver more 0.50% hikes and we could see rates rise to 2% by the end of Q2. Macklem has signalled the rate-hike cycle could be very aggressive, saying that he will lift rates above 3% if necessary, in order to beat back spiralling inflation.


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USD/CAD Technical



  • USD/CAD is testing resistance at 1.2962. Above, there is resistance at 1.3023

  • There is support at 1.2848 and 1.2787


 



Source: CAD rallies on US consumer confidence