The Canadian dollar has declined for a second straight day. In the North American session, USD/CAD is trading at 1.2386, up 0.46% on the day.
Canada’s GDP expected to decline
Canada releases the April GDP report on Wednesday. In March, the economy posted a strong gain of 1.1%, but the market is bracing for a reversal in April, with a consensus of -0.8%. Canada has been slowly reopening its economy after a slow vaccine rollout. The Bank of Canada was the first of the major central banks to tighten policy, but a decline in GDP would likely preclude the BoC from raising interest rates anytime soon.
The US dollar has posted gains this week, as Covid fears have dampened risk appetite. This has made the safe-haven US dollar more attractive, as investors look for stability and security. With Covid infection rates resurging in Western Europe, Russia and China, the US dollar could continue to post gains this week.
The strong recovery has put consumers in an optimistic mood. The CB Consumer Confidence index is projected to accelerate in June, with a forecast of 119.0, up from 117.2 beforehand. This confirms the trend seen on Friday from UoM Consumer Sentiment, which rose in June to 85.5, up from 82.9 previously. The UoM report found that with the US recovery in full swing, some three-quarters of consumers expect interest rates to rise in 2022.
Investors are casting an eye to Friday, with the release of the nonfarm payroll report for June. The number of new jobs created in recent months has not been as strong as expected, with many workers still receiving unemployment benefits in the wake of the Covid pandemic. The estimate for NFP stands at 690 thousand, compared to 559 thousand previously.
- USD/CAD faces resistance at 1.2440, followed by resistance at 1.2580
- On the downside, there is support at 1.2206. Below, there is support at 1.2112
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