Dollar looks to retail sales with Syrian anxiety in the background

The U.S. dollar lost against most majors even if it appreciated against safe-haven currencies on Friday. The Syrian conflict concerns faded at the end of the week and boosted the USD versus the JPY and the CHF. The release of the meeting notes from the March Federal Open Market Committee (FOMC) proved to be a positive for the American currency as the Fed was more hawkish than expected. Next up for the markets will be the release of retail sales data in the United States and the Bank of Canada (BoC) rate statements. U.S. retail sales will be published on Monday, April 16 at 8:30 a.m. Eastern. The BoC will release its rate statement on Wednesday, April 18 at 10:00 a.m. Eastern.

Dollar struggles with too many fronts open

The euro/U.S. dollar (EUR/USD) currency pair gained 0.45% during the week. The single currency is trading at 1.2335 after the release of the FOMC minutes from the March meeting where the central bank raised rates by 25 basis points. The European Central Bank (ECB) also release the notes from its monetary policy meeting. The contrast between the two was an important factor in the direction of the pair, but not the dominant one as Western states considered air strikes against Syria for its use of chemical weapons.

The White House’s tough talk on trade has eroded some of the confidence in the greenback as a reserve currency. In the case of a trade war breaking out it is unclear if America would be the winner after reciprocal tariffs would hurt U.S. producers. The Trump administration has opened too many fronts as uncertainty rises on the staff who will be left to manage the offensive.

U.S. retails sales will prove decisive for a dollar looking for support. After a soft start in 2018 a rebound in March data is expected. Given the importance of U.S. consumers to the economy, a strong retail sales indicator would appreciate the USD versus the euro.

Canadian Dollar Rises Ahead of BoC Despite Weak Housing Data

The U.S. dollar/Canadian dollar (USD/CAD) currency pair lost 1.29% in the past five days. The currency pair is trading at 1.2615 as trade war concerns have faded. The weakness of the USD and the strength of oil prices have taken the Canadian dollar to the top spot against the USD from all major pairs. The NAFTA treaty pessimism is now optimism as the United States has softened its hard stance and various reports are pointing to lower demand on autos, but there is still a huge gap in other sectors that might not be bridged on the fast track the United States expects.

The Bank of Canada (BoC) is anticipated to keep its benchmark interest rate unchanged at 1.25 percent on Wednesday. The central bank has mentioned trade uncertainty as a big factor as well as the slowdown of the economy. Housing data this week revealed lower building permits than expected as well as a downturn in prices of new homes. A positive this week for the loonie was the release of the BoC Business Outlook Survey. Businesses remain optimistic about the economy despite the unclear fate of NAFTA. The central bank is expected to hike at least twice this year, but April is too early with so many unknowns still up in the air.

The fact that the US is now reconsidering rejoining the Trans-Pacific Pact in an effort to offset China’s growing influence is a good sign for the survival of NAFTA. Due to the escalation of the Syrian conflict U.S. President Trump had to cancel his appearance at the Americas Summit in Peru, where the market expected some insight on NAFTA negotiations and how much did the U.S. negotiations were making a real effort.

Canadian dollar weekly graph April 9, 2018