Forex watch

On Thursday, the Canadian Dollar rallied as much as 1% against the USD but failed to hold gains finishing a touch lower as North American equities eased from early level rallies. As US President Obama’s visit to Canada has come and gone, he commented that the U.S. and Canada will cooperate on issues including energy, the economy and assured that the recently enacted U.S. stimulus bill won’t hamper trade between the two countries.

CAD opened up slightly lower ahead of US Inflation numbers which will be released at 8:30am EST while the Canadian inflation number came in softer than expected in January taking the annual inflation rate to 1.1% from 1.2%. With the lower than expected CPI numbers the Bank is likely to deliver just one more 50 bps rate cut to leave the overnight rate at 0.5% at the March meeting. The impact of that data today will likely be muted as the market focuses on the global economic outlook and equities.

As today’s economic data will probably be overshadowed by the market’s negative appetite towards risk, we look to trade range bound for the remainder of the day. Flows, risk appetite and equities continue to be very important for short-term direction and the strategy should remain the same and utilizing orders to capitalize on short-lived market movements.