Canada’s Dollar Fell below Parity before CPI - 23.3.2012
US Dollar
The dollar strengthened against its major counterparts yesterday, except the Japanese yen, with the dollar index, touching 79.94, the highest in a week. After the data from the US labor market showing the number of initial jobless claims fell to a 4-year low of 348000, today investors will be closely watching February’s new home sales figures. According to preliminary estimations the measure rose to 325000 annual rate in February from 321000 in January, a 1.3% growth. Yesterday the Fed President Ben Bernanke in a lecture at George Washington University emphasized the importance of consumer spending for the economic recovery, indicating that consumption is “quite weak relative to where it was before the crisis.”
At the same time the head of Federal Reserve Bank of St. Louis, James Bullard, sounded more optimistic in a speech at Investment Conference in Hong Kong. With the current monetary policy “on pause, it may be a good time to take stock of whether we may be at a turning point,” he said. Bullard also added that with the continuing recovery of the economy the central bank should avoid “an overcommitment to ultra-easy monetary policy.” The economy may expand by nearly 3% according to St. Louis Fed chief, as “the outlook has improved markedly” in the recent months. In Asian trading hours the dollar was little changed, having gained only some points against the Canadian, Australian and Japanese peers.
Euro
The euro maintains a narrow range against the greenback, despite falling yesterday to a one-week low 1.3133 on disappointing euro area PMI data. In Asian trading hours the pair traded around 1.3200, close to the 20-day moving average, which seemed to be a resistance in the latest trading sessions. At the same time it’s worth mentioning rising government bonds yields of some euro area nations. The yield of Italian 10-year notes exceeded 5% for the first time in almost three weeks, while Spain’s debt with the same maturity is targeting at 5.50%, the highest since January 2012. There is no a lot of data from the euro zone today, except probably France’s PMI.
Canadian Dollar
The Loonie fell below parity against the US counterpart yesterday for the first time since March 7. The pair USD/CAD touched 1.0007 and remained above parity by the end of the Asian trading session. Weaker than expected manufacturing reports from Europe and China, as well as domestic retail sales data have contributed to the Canada’s currency depreciation. In January the volume of retail sales increased considerably less than economists predicted an average – by 0.5% instead of 1.8%, while the volume of sales excluding autos even dropped by 0.5%. Today February’s CPI report will be released. Previous forecasts showed the inflationary pressure may increase from 2.5% to 2.7% annualized or to 2.2% from 2.1% in core figures.
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