USD/CAD Slumps as Easing Trade War Fears Fail to Inspire Dollar Rally
The dollar remained under pressure against a basket of major currencies despite strong producer inflation data as an ongoing rally in the Canadian dollar continued to weigh on the greenback.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.13% to 89.41.
The Labor Department said on Tuesday its producer price index for final demand increased 0.3% last month, beating economists’ forecast for 0.1% growth. In the 12 months through March, the PPI rose 3%.
The PPI data came a day ahead of the consumer price index data, which will likely be scrutinised to assess whether the uptick in input prices spurred consumer inflation.
Bank of Montreal said the PPI data released Tuesday reflected a "healthy print,” showing price pressures at the producer level. The bank said it would await Wednesday's CPI print to determine if rising input costs were passed onto consumers or “whether the costs were mostly absorbed by producer margins.”
The greenback struggled to hold gains, however, as the Canadian dollar continued its advance amid a strong rise in oil prices and ongoing expectations that a new North American Free Trade Agreement (NAFTA) deal will be announced sooner rather than later despite a setback this week.
Talks to rework NAFTA were reportedly not advanced enough for the United States, Mexico, and Canada to announce a deal in principle at this month's Summit of the Americas in Lima, which gets underway April 13.
USD/CAD fell 0.71% to C$1.2608, below its 200-day moving average of C$1.2631.
Yet, a sharp move higher in USD/JPY to Y107.25 eased downside momentum in the dollar basket as trade-war fears faded amid comments overnight from China’s president Xi Jinping. Xi said that China would lower import tariffs on vehicles, encourage imports and strengthen the protection of intellectual property.
EUR/USD rose 0.18% to $1.2342 but pared some of its intraday gains earlier after the European Central Bank (ECB) reportedly downplayed hawkish comments on monetary policy from ECB policymaker Ewald Nowotny.
"Nowotny's views are his own and don't represent the view of the governing council,” an ECB spokesman reportedly said.
GBP/USD rose 0.25% to $1.4147, amid an uptick in investor expectations for a Bank of England (BoE) rate hike after Ian McCafferty reportedly said the BoE “shouldn't dally when it comes to tightening policy modestly.”