In the European session on Friday, the Canadian dollar rose against major currencies due to a mismatch in monetary policy between the US Federal Reserve and the Bank of Canada, which recently announced a decision to cut its quantitative easing program from CAD 4 billion to CAD 3 billion a week.
The Central Bank now expects inflation to steadily return to 2% sometime in the second half of 2022. This means that the Bank of Canada may raise the overnight rate earlier than expected. The Fed said it will support ultralight policy until “substantial progress” is made towards employment and price stability targets.
Data from Statistics Canada showed that Canada’s economy expanded 0.4% in February, after rising 0.7% a month earlier. An increase of 0.5% was expected.
The loonie rose to 1.4820 against the euro (the highest level since April 6) and is likely to meet resistance around 1.44.
According to the Federal Statistical Service, in the first quarter, the contraction of the German economy accelerated due to the coronavirus pandemic. GDP fell 1.7% sequentially after growing 0.5% in Q4 2020. This is more than the forecast of -1.5%.
The Canadian dollar hit 88.82 against the yen, compared to Thursday’s close at 88.66. If the gains continue, the next resistance level is likely to be at 0.90.
Data from the Ministry of Economy, Trade and Industry showed that industrial production in Japan rose by 2.2% on a seasonally adjusted basis in March. This exceeded expectations for a 2.0% decline after falling 1.3% in February.
The Canadian dollar jumped to 0.9555 against the Australian dollar, setting a new 4-week high. The next resistance level is likely to be around 0.92.
At the same time, the Canadian dollar fell to $ 1.2277 as it strengthened on favorable economic data. This followed 1.2266, the highest since February 2018 at 8:15 am ET. The next support is likely around the 1.25 level.
Data from the US Department of Commerce showed that personal income rose sharply by 21.1% in March, after falling 7.0% in February.