The Canadian dollar is trading lower midweek as the head of the US central bank wrapped up his semi-annual testimony on Capitol Hill on Wednesday and investors eye the latest US economic data. Analysts warn that the loonie is not expected to record any significant movement in the coming weeks until trade negotiations between Washington and Ottawa are completed.
Federal Reserve Chair Jerome Powell spoke before the House Financial Services Committee, reiterating his positive outlook for the national economy, which sent the loonie lower. He delivered prepared remarks to the Senate Banking Committee on Tuesday.
Powell noted that inflation would stay close to 2%, the labor market would remain robust, and the central bank would continue to gradually raise interest rates. He did not confirm if there will be two more rate hikes this year, but the market does anticipate a rate hike in September and December, according to the CME Group FedWatch tool.
Powell told policymakers:
For the past three years, we have been gradually returning interest rates and the Fed’s securities holdings to more normal levels as the economy strengthens. We believe this is the best way we can help set conditions in which Americans who want a job can find one, and in which inflation remains low and stable.
His bullish sentiments, which did not deviate from the Federal Open Market Committee (FOMC)âs recent minutes, prompted the Forex market to buy the greenback and sell the Canadian dollar.
However, the US dollarâs momentum could not be sustained in the middle of the trading week amid disappointing housing numbers. The real estate market took a hit in June, slipping to nine-month lows: housing starts fell 12.3% to a seasonally adjusted annual rate of 1.173 million and building permits tumbled 2.2% to 1.273 million units.
The US Dollar Index did record a 0.17% increase, rising to 95.14, but it pared most of its gains on Wednesday. Despite a slow start to 2018, the index is up more than 6% over the last three months.
Meanwhile, Canadian markets are not expecting any important economic news until Friday, when the consumer price index (CPI) and retail sales data reports are scheduled to be released. With North American Free Trade Agreement (NAFTA) talks hitting a standstill, the loonie may be trading sideways in the short-term.
The USD/CAD currency pair rose 0.14% from an opening of 1.3191 to 1.3211 at 15:55 GMT. The EUR/CAD shed 0.08% from an opening of 1.5382 to 1.5371.
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