Investing.com - The Canadian dollar was little changed against its U.S. counterpart on Thursday. The loonie gained support from firm risk on sentiment in equities but remaining under pressure from this week’s cooler than expected domestic CPI data that boosted bets of a rate cut from the Bank of Canada as early as April.
Analysts at MUFG note, “The release of the Canadian CPI report for January has provided a setback for the CAD….. the softer CPI data has encouraged market participants to more fully price in the BoC beginning to cut rates by the June policy meeting.”
“In light of these developments, we see room for the Canadian rate market to price in more than 75 bps of rate cuts by the end of this year.”
In contrast, rate cuts from the US Federal Reserve are expected to begin rate cuts in June, with risks skewed to a later move, as per a survey of economists polled by Reuters.
Today’s economic data on both sides of the border was relatively low impact, doing little to move the needle on the USDCAD pair.
Data from Statistics Canada shows that retail sales grew by 0.9% in December from November, while January's preliminary estimate indicated a 0.4% decline on the month. The November reading meanwhile was upwardly revised from -0.2% to show no change.
On the U.S. docket meanwhile, The S&P Global Composite PMI came in cooler than expected, as did initial jobless claims.
Looking ahead for the pair, the MUFG analysts note that the CPI print has “Increased the likelihood that USD/CAD will continue to trade above support from the 200-DMA which comes in at around 1.3480 in the near term.”