Investing.com - The U.S. dollar fell against the Canadian dollar on Friday as the release of stronger-than-expected Canadian inflation data eased pressure on the Bank of Canada to cut interest rates.
USD/CAD slid 0.18% to settle at 1.1220, backing off the four-and-a-half year peaks of 1.1277 reached on Thursday.
The pair is likely to find support at 1.1121, Wednesday’s low and resistance at 1.1277.
The Canadian dollar found support after Statistics Canada reported that consumer prices rose 0.8% in February, up from 0.3% in January. Analysts had forecast a 0.6% rise.
On a year-over-year basis, inflation slowed to 1.1%, from 1.5% in January.
The loonie, as the Canadian dollar is also known, received an additional boost after a separate report showed that Canadian retail sales rose 1.3% in January, recouping some of the previous months 1.9% decline. Market expectations had been for an increase of 0.8%.
Earlier in the week, BoC Governor Stephen Poloz warned that the bank could have to cut rates if inflation remains low. He also warned that economic growth in the first quarter could be “on the soft side”.
The dollar rose to its highest level against the loonie since July 2009 on Thursday, buoyed up by expectations that the Federal Reserve could hike interest rates earlier than previously thought.
The dollar strengthened across the board Wednesday after Fed Chair Janet Yellen indicated that the bank could begin to raise interest rates about six months after its bond-buying program winds up, which is expected to happen this fall.
The comments prompted investors to bring forward expectations for a rate hike to as soon as March of next year.
The Fed also reduced its monthly bond purchases by an additional $10 billion to $55 billion at the conclusion of its two-day policy meeting, and said there was “underlying strength in the broader economy.”
In the coming week, investors will be looking ahead to U.S. data from the housing sector, as well as reports on consumer confidence and durable goods. Canada is not scheduled to release any economic reports.
Ahead of the coming week, Investing.com has compiled a list of significant events likely to affect the markets.
Monday, March 24
The U.S. is to release preliminary data on manufacturing activity.
Tuesday, March 25
The U.S. is to release report on house price inflation and consumer confidence, as well as official data on new home sales.
Wednesday, March 26
The U.S. is to release data on durable goods orders, a leading indicator of production.
Thursday, March 27
The U.S. is to publish final data on fourth quarter economic growth. The nation is also to release the weekly report on initial jobless claims and private sector data on pending home sales.
Friday, March 28
The U.S. is to round up the week with a report on personal spending and revised data on consumer sentiment.