USD/CAD consolidates strong weekly gains as CAD losses momentum

After being among the strongest currencies for some time, the Canadian dollar is about to end the week with losses across the board. On Friday dropped further after the release of Canadian economic data. 

On Friday, inflation figures showed headline consumer prices tracked by the CPI rising in August 0.1% (against 0.2% expected) and at an annualized rate of 1.4% (1.5%). The inflation index used by the Bank of Canada remained unchanged in August. 

Another report showed that retail sales rose 0.4% in July, while sales excluding the Autos sector expanded 0.2% (under the 0.4% expected). 

USD/CAD gained momentum after the report and rebounded from 1.2250, rising back on top of 1.2300. During the US session peaked at 1.2351, level located below weekly highs. 

Important weekly gains 

The pair was about to end the week hovering around 1.2340, up 150 pips. The best weekly performance since July. Prior to Friday’s data, USD/CAD received support from the Fed and the BoC. 

BoC Governor Lane spoke about the appreciation of the Canadian dollar. The expectations of another rate hike in October dropped, weakening the Loonie. 

The pair received another impulse from the Federal Reserve meeting. The Fed announced the beginning in October of the balance sheet normalization process and left the door open to another rate hike before year-end, triggering a rally of the greenback. 

The bearish tone that USD/CAD had two weeks ago has changed. The trend still points to the downside but recent events from a fundamental perspective had weakened the bullish trend of the Loonie.