USD/CAD Weekly Fundamental Analysis – April 11-15, 2016 -Forecast

The USD/CAD ended the week below the 1.30 range with a dip of 0.25% as the greenbacks losses helped support the Loonie. The reversal in oil prices late on Friday helped the CAD strengthened. Federal Reserve Chair Janet Yellen, in a conversation with former Fed chairmen on Thursday, said the U.S. economy is on a solid course and still on track to warrant further interest rate hikes.

The Canadian dollar strengthened to a one-week high against its US counterpart on Friday, with investor optimism buoyed by stronger-than-expected Canadian jobs data and a rally in oil prices.

The economy created 40,600 jobs in March, far surpassing economists’ expectations for 10,000, and driven by a 35,300 increase in full-time jobs. The unemployment rate declined to 7.1 percent, its lowest since December.

“Canada is getting some positive benefits at least from a very diversified economy,” said Sebastien Lavoie, assistant chief economist at Laurentian Bank.

The implied probability of a Bank of Canada interest rate cut this year dropped to 12 percent from 20 percent before the report. It was more than 50 percent a little more than one month ago.

Still, market players doubted the report would trigger a hawkish response from the Bank of Canada at next week’s interest rate announcement.

The central bank “won’t want to say anything that would push the currency up from here” mindful that a weaker currency had helped Canada’s economy, said Hosen Marjaee, senior managing director, Canadian fixed income at Manulife Asset Management.

Oil prices rose, lifted by fresh hopes that producing countries would agree to freeze oil output and firm economic indicators from the United States and Germany that boded well for fuel demand.

US crude prices settled at $39.72 a barrel, up 6.6 percent.

New York Fed President William Dudley on Friday said the central bank must approach further rate hikes cautiously and gradually because of lingering external risks to the U.S. economy, despite some strength at home and welcome hints of inflation.

Global central bank rhetoric really has been the driver of the S&P 500 and all of the major indices. The Banks of Canada and England will deliver their respective interest rate decisions, which will certainly have an impact on the market as monetary policy actions have been driving the markets. In addition, several Federal Reserve speakers will be making presentations on the economy across the U.S.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Major Economic Events for the week:

Upcoming Government Bond Auctions

Date Time Country 

Apr 12 11:30 Germany Holds I/L bond auction

Apr 12 19:00 US Holds 3-year note auction

Apr 13 11:03 Sweden Holds bond auction

Apr 13 11:10 Italy Holds bond auction

Apr 13 11:15 Switzerland Holds bond auction

Apr 13 11:30 UK Holds bond auction

Apr 13 19:00 US Holds 10-year note auction

Apr 14 12:00 Iceland Holds bond auction