After losing for three straight days, the Loonie bulls decided that they had enough of just sitting back and letting the bears trample all over them. USD/CAD fell to 1.0222 by the end of the U.S. trading session, 130 pips lower from its Asian session opening price. Was the upmove we saw the past three days simply a retracement of the overall downtrend? Hah, that’s what it seems like!
Apparently, risk appetite from positive corporate earnings and the overall sentiment that the Fed will engage in another round of quantitative easing were the primary culprits in USD/CAD’s decline. Traders turned their “risk” on and started dumping the Greenback in favor of higher-yielding currencies like the Loonie.
Canada’s wholesales report also helped. It revealed that sales grew 1.2% in August, more than double the 0.5% increase initially predicted and a huge improvement from the previous month’s flat reading.
Not everything was rainbows and sunshine though. The BOC monetary policy report that was released yesterday showed that the bank has lowered its growth forecast for the upcoming quarters as currency tensions and global trade imbalance continue to get worse. It also provided no hint of another rate hike, which could cap the Loonie’s rally.
For today, the data to keep an eye out for is Canada’s leading index at 12:30 pm GMT. A 0.2% reading is expected for September, which is slightly lower than August’s 0.5%. The leading index tries to predict the direction of Canada’s economy, so falling figures mean that growth in the country is expected to slow down. If the actual comes out higher, we may see the Loonie climb higher against the Greenback again.