USD/CAD makes a sharp U-turn, slumps below 1.3430

Treasury Sec. Mnuchin says they are close to deal with Canada on tariffs.
BoC's core CPI drops to 1.5% in April.
US Dollar Index turns flat near 97.50

Eren Sengezer FXStreet

The USD/CAD pair rose to a weekly high of 1.3493 in the early NA session but failed to push higher and changed its direction in the last hour to erase all of its daily gains. As of writing, the pair was down 0.2% on a daily basis at 1.3433.

Earlier today, Statistics Canada reported that inflation, as measured by the Consumer Price Index, ticked up to 2% on a yearly basis in April and came in line with the market expectation. However, the Bank of Canada's core CPI, which strips volatile energy and food prices, fell to 1.5% and missed the analysts' estimate of 1.8%, suggesting that the BoC is unlikely to continue to hike rates in a soft inflation environment and weighed on the loonie.

However, following the initial spike in reaction to the data, the pair made a sharp U-turn with the latest trade headlines helping the CAD gather strength. According to the Wall Street Journal, Treasury Secretary Mnuchin said they were close to an understanding with Mexico and Canada on resolving steel and aluminum tariffs.

On the other hand, several news outlets reported that the Trump administration was planning to delay tariffs on European car imports to help the risk appetite return to markets and hurt the demand for the safer greenback. The US Dollar Index, which rose to 97.70 earlier in the session, erased its gains and turned flat near 97.50. Today's data from the U.S. showed that retail sales and industrial production both declined in April but was largely ignored by the markets.

On Thursday, manufacturing shipments and ADP employment change data from Canada will be looked upon for fresh impetus. The U.S. economic docket will feature weekly jobless claims and housing starts figures.

Technical levels to watch for

The pair could face the first hurdle at 1.3500 (psychological level) ahead of 1.3520 (Apr. 24 high) and 1.3600 (Dec. 21, 2018, high). On the downside, supports are located at 1.3425 (daily low), 1.3400 (50-DMA) and 1.3345 (Apr. 23 low).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

EUR/USD climbs to daily highs on US CPI

EUR/USD now accelerates it rebound and flirts with the 1.1880 zone on Friday, or daily highs, all in response to renewed selling pressure on the US Dollar. In the meantime, US inflation figures showed the headline CPI rose less than expected in January, removing some tailwinds from the Greenback’s momentum.

GBP/USD clings to gains above 1.3600

GBP/USD reverses three consecutive daily pullbacks on Friday, hovering around the low-1.3600s on the back of the vacillating performance of the Greenback in the wake of the release of US CPI prints in January. Earlier in the day, the BoE’s Pill suggested that UK inflation could settle around 2.5%, above the bank’s goal.

Gold: Upside remains capped by $5,000

Gold is reclaiming part of the ground lost on Wednesday’s marked retracement, as bargain-hunters seem to have stepped in. The precious metal’s upside, however, appears limited amid the slightly better tone in the US Dollar after US inflation data saw the CPI rise less than estimated at the beginning of the year.