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