The Canadian dollar retreated against its US counterpart and other major peers on Tuesday, despite a report that revealed a stronger trade surplus in Canada than expected. The US dollar has been strongly supported this week by higher odds of an interest rate hike from the Federal Reserve.
Statistics Canada, the central statistical office of the country, released its report for the international trade balance, which said that Canadian trade surplus rose to $807 million in January, compared to expectations of $700 million. The monthly gain, which is the third in a row, was mostly due to improved auto exports. Canada last had three consecutive months of trade surplus more than two years ago.
Exports rose 0.5% to $46.5 billion, while imports decreased 0.3% to $45.6 billion in January. Lower exports of consumer goods and mineral products were offset by higher exports of cars and food products. Meanwhile, imports declined as Canada brought in less metals and industrial machinery. The report revised the trade surplus in December 2016 from $923 million to $447 million.
In the United States, a stream of comments from Federal Reserve officials sparked a sudden increase in investorsâ anticipation for an interest rate hike when the Federal Open Market Committee meets later this month. The CME Group FedWatch tool shows an 88.6% probability of higher interest rates.
Federal Reserve Chairwoman Janet Yellen gave a speech in front of the Executivesâ Club of Chicago on Friday, during which she said that raising the Federal funds rate would be appropriate in March. The committeeâs meeting will be held on March 15.
USD/CAD traded at 1.3417 as of 16:35 GMT on Tuesday, from 1.3428 at 15:10 GMT, the pairâs strongest level since January 4. USD/CAD started the day today at 1.3398.
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