- A combination of factors dragged USD/CAD to over a one-week low on Wednesday.
- An uptick in crude oil prices, stronger Canadian CPI reported benefitted the loonie.
- The risk-on impulse, dismal US Retail Sales data undermined the safe-haven USD.
- The focus remains glued to the highly-anticipated FOMC monetary policy meeting.
The USD/CAD pair continued losing ground through the early North American session and dropped to a one-and-half-week low, around the 1.2685 area following the release of Canadian/US macro data.
The pair witnessed heavy selling for the second successive day on Wednesday and has now retreated nearly 200 pips from the overnight swing high, around the 1.2870 region. The downfall was sponsored by a broad-based US dollar weakness and an uptick in crude oil prices, which tend to benefit the commodity-linked loonie.
Hopes for a diplomatic solution to end the war in Ukraine, along with the Chinese government's promise to support stability in the stock market, boosted investors' confidence. This was evident from a strong rally in the global equity markets, which drove flows away from traditional safe-haven assets and weighed on the greenback.
The USD bulls failed to gain any respite from softer-than-expected US monthly Retail Sales data, which showed a plunge in consumer spending during February. In fact, the headline sales recorded a modest 0.3% growth during the reported month, marking a sharp deceleration from the previous month's upwardly revised reading of 4.9%.
Adding to this, sales excluding autos also missed expectations and rose just 0.2% in February as against the 4.4% surge recorded in the previous month (revised higher from 3.3% reported earlier). The data did little to ease the bearish pressure surrounding the buck, though elevated US Treasury bond yields helped limit losses.
Conversely, the Canadian dollar drew support from strong domestic consumer inflation figures. In fact, the headline CPI edged higher to 1% in February and the yearly rate accelerated to 5.7% from the 5.1% previous. More importantly, the Bank of Canada's Core CPI, which excludes volatile food and energy prices, shot to a 4.8% YoY rate.
With the key economic releases out of the way, the market focus shifts back to the outcome of a two-day FOMC monetary policy meeting. The Fed is scheduled to announce its decision later during the US session, which will influence the USD demand. This, along with oil price dynamics, should provide a fresh impetus to the USD/CAD pair.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD rises toward 1.0700 after Germany and EU PMI data
EUR/USD gains traction and rises toward 1.0700 in the European session on Monday. HCOB Composite PMI data from Germany and the Eurozone came in better than expected, providing a boost to the Euro. Focus shifts US PMI readings.
GBP/USD holds above 1.2350 after UK PMIs
GBP/USD clings to modest daily gains above 1.2350 in the European session on Tuesday. The data from the UK showed that the private sector continued to grow at an accelerating pace in April, helping Pound Sterling gather strength.
Gold price flirts with $2,300 amid receding safe-haven demand, reduced Fed rate cut bets
Gold price (XAU/USD) remains under heavy selling pressure for the second straight day on Tuesday and languishes near its lowest level in over two weeks, around the $2,300 mark heading into the European session.
Here’s why Ondo price hit new ATH amid bearish market outlook Premium
Ondo price shows no signs of slowing down after setting up an all-time high (ATH) at $1.05 on March 31. This development is likely to be followed by a correction and ATH but not necessarily in that order.
US S&P Global PMIs Preview: Economic expansion set to keep momentum in April
S&P Global Manufacturing PMI and Services PMI are both expected to come in at 52 in April’s flash estimate, highlighting an ongoing expansion in the private sector’s economic activity.