The Loonie has not changed much from the start of the week as it fights to retrace the decline following Canada’s Employment report. The key event risk in schedule, later this week may sway the near-term outlook for the exchange rate if the Federal Reserve adjusts the forward guidance for monetary.
The USDCAD pair price is near the yearly low (1.2441) ahead of the update to Canada’s Consumer Price Index (CPI), which is anticipated to display the headline reading for inflation climbing to 1.3% from 1.0% per annum in February, but the Federal Open Market Committee (FOMC) interest rate decision may overshadow the key data print as the central bank is slated to release the Summary of Economic Projection (SEP).
If the Fed officials exploit the interest rate dot-plot to indicate an imminent change in policy as Congress passes the $1.9 trillion coronavirus recovery package, and projections for a more robust recovery may generate a bullish reaction in the US Dollar.
Nevertheless, more of the same from the FOMC may keep key market topics in place as Chairman Jerome Powell warns that “it’s not at all likely that we’d reach maximum employment this year,” and the US Dollar may continue to reflect an inverse relationship with investor confidence as long as the FOMC stays on path to “increase our holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month.”
In turn, the Loonie pair may continue to demonstrate the bearish behavior seen in 2020 as it dropped to a fresh yearly low (1.2441) in March, but the shift in retail sentiment looks in position to persist as traders have been net-long the pair since May 2020.
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