Canadian Dollar Fluctuates on Weak Demand Ahead of BoC Decision, Despite Higher Oil Prices

The Canadian dollar failed to move higher against its major peers on Monday, even as higher oil prices initially supported the currency. Demand for the loonie was weak today as traders held their positions ahead of an interest rate decision that the Bank of Canada will announce in two days.

The Canadian central bank is widely expected to keep its interest rates unchanged at 0.50% when it announces its decision at 15:00 GMT on Wednesday. Bank of Canada Governor Stephen Poloz said on January 31 that his bank will not move in line with the US Federal Reserve, adding that interest rate cuts are still on the table.

Traders remain concerned toward the consequences that could follow changes US President Donald Trump might introduce to the North American Free Trade Agreement. The US president is due to speak to Congress on Tuesday, and his speech is expected to bring more elements of his tax reform proposal to light. Tax cuts in the United States, Canada’s biggest trade partner, could have a negative impact on the Canadian dollar.

An economic release in Canada on Tuesday will reveal a new reading for the raw material price index, which measures inflation in the manufacturing sector. The Bank of Canada maintains a target for inflation at 2.0%, which compared to an average of 1.6% in January between the three indicators adopted by the central bank last year to measure inflation.

Meanwhile in the United States, durable goods orders beat estimates in January, according to the US Census Bureau. The released report from the bureau said that orders for durable goods rose $4.0 billion, or 1.8%, to $230.4 billion last month. Another report, released by the US National Association of Realtors, said that pending home sales dropped 2.8% in January. Investors await the preliminary gross domestic product data from the US Bureau of Economic Analysis on Tuesday.

USD/CAD traded at 1.3100 as of 17:25 GMT on Monday, from 1.3088 at 14:35 GMT, the pair’s lowest level for the day. USD/CAD started the week at 1.3097.

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