USD/CAD Tests 1.25 As Falling Crude Prices, Fed Meeting Weigh on Loonie

The Canadian dollar is modestly sliding against its US peer in the middle of the trading week, ostensibly hitting the pause button as one of the world’s top-performing currencies. The loonie is paring its gains mostly on falling energy prices, as well as investors seeking shelter in conventional safe-haven assets, like the US dollar and the Swiss franc. But what about domestic data?

According to Statistics Canada, the annual inflation rate climbed 1.1% in February, up from 1% in January. But inflation reading came in below the market forecast of 1.3%. Still, this was the biggest rate in a year, led by rising gasoline, food, shelter, and health care prices.
On a monthly basis, the inflation rate jumped 0.5% last month, down from the 0.6% boost in January. Economists had projected a monthly increase of 0.7%. Also, the core inflation rate, which removes volatile food and energy, clocked in at 1.2% year-over-year in February.
Earlier this week, the statistics agency reported that producer prices recorded a substantial jump in February. The producer price index (PPI) advanced 2.5% last month, and the annualized PPI soared 6.9%.
Housing prices and retail sales data will close out the week.
Crude oil prices trended lower midweek. April West Texas Intermediate (WTI) crude oil futures tumbled $0.78, or 1.2%, to $64.01 per barrel. April natural gas futures slumped $0.046, or 1.77%, to $2.551 per million British thermal units (btu).
Since Canada maintains a current account deficit, exports are critical to growth in the national economy. Oil and gas remain the country’s top shipments to foreign markets, so any price change can affect the loonie and the broader economy.
Global financial markets are monitoring the Federal Reserve’s two-day Federal Open Market Committee (FOMC) policy meeting that finishes on Wednesday. It is widely expected that the US central bank will leave interest rates unchanged and that its aggressive quantitative easing program will be intact. But investors are waiting for guidance from the Eccles Building, which explains the quiet trade among the leading benchmark indexes.
The country’s bond market was mostly in the green on Wednesday, with the benchmark 10-year bond rose 0.052% to 1.62%. The one-year bill edged up 0.02% to 0.21%, while the 30-year bond advanced 0.032% to 2.065%.
The USD/CAD currency pair climbed 0.37% to 1.2492, from an opening of 1.2447, at 15:18 GMT on Wednesday. The EUR/CAD rose 0.38% to 1.4869, from an opening of 1.4817.
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Original from: www.earnforex.com