Investing.com - The broadly stronger U.S. dollar rallied to two-month highs against the Canadian dollar on Friday after weak Canadian inflation data sparked speculation over a possible rate cut by the Bank of Canada.
hit highs of 1.0312 the pair’s highest since March 8, before trimming gains to settle at 1.0276, 0.83% higher for the day and up 1.68% for the week.
The pair was likely to find support at 1.0178, Friday’s low and resistance at 1.0335, the high of March 6.
Statistics Canada said the annual rate of consumer price inflation fell to 0.4% in April from 1.0% the previous month and well below the Bank of Canada’s targeted inflation range of 1% to 3%.
The report attributed the largest drop in inflation since October 2009 to lower gasoline prices. Gasoline prices fell 6.0% in April compared to a year earlier, also the largest decline since October 2009.
The U.S. dollar was boosted after data showed that U.S. consumer sentiment rose more than expected in May, climbing to an almost six year high.
The University of Michigan said its consumer sentiment index jumped to 83.7 in May, its highest level since 2007, from 76.4 in the preceding month, outstripping expectations for a reading of 78.0.
A separate report by the Conference Board showed that its index of leading economic indicators rose 0.6% in April, more than double the 0.2% increase expected by economists.
The robust data bolstered expectations that the Federal Reserve could begin to scale back its USD85 billion a month asset purchase program this year.
The data came after a series of economic data releases on Thursday raised doubts over the strength of the U.S. economic recovery.
Official data showed that consumer price inflation and housing starts fell more-than-expected in April, while jobless claims posted the largest increase in six months.
In the week ahead investors will be focusing on Wednesday’s Federal Reserve minutes, as well as testimony on the economic outlook and monetary policy by Fed Chairman Ben Bernanke. Markets will also be watching Canadian retail sales data.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Tuesday as there are no relevant events on this day.Monday, May 20
Markets in Canada are to remain closed for the Victoria Day holiday.Wednesday, May 22
Canada is to produce official data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
The U.S. is to release data on existing home sales, a leading indicator of economic health, while the Federal Reserve is to publish the minutes of its most recent policy-setting meeting.
Meanwhile, Fed Chairman Ben Bernanke is to testify on the economy and monetary policy in Washington.Thursday, May 23
The U.S. is to release the weekly government report on initial jobless claims and official data on new home sales, a leading indicator of economic health.Friday, May 24
The U.S. is to round up the week with government data on durable goods orders, a leading indicator of production.