USD/CAD up amid disappointing IPPI data
Tuesday 23 May, 2023
Daily Currency UpdateThe USD/CAD pair is up today after the release of the Industrial Product Price Index (IPPI) fell 0.2% month-over-month and a staggering 3.5% year-over-year. The IPPI measures the prices of products that are manufactured in Canada. This data release shows the Canadian manufacturing industry has still not recovered since last year and continues to slide month to month. The disappointing IPPI release further strengthens the idea that the Bank of Canada (BoC) may be close to the upper limit for interest rates. In other data releases, the Raw Materials Price Index (RMPI), which measures the prices of raw materials purchased by manufacturers in Canada, rose 2.9% monthly and fell 10.8% year-over-year. This monthly increase can be attributed to higher oil prices in April.
Key MoversThe dollar index (DXY) is up today, currently sitting at the 103.36 level, amid the release of USD Manufacturing Purchasing Manager’s Index (PMI) data. The PMI report came in below forecasted levels this morning at 48.5 versus the expected 50.0. This lower number is further proof that the US economy may be slowing down likely due to the rapid rise in interest rates. This is another potential sign that the Federal Reserve may begin slowing down rate hikes. The USD Services PMI was also released at 55.1, well above the expected 52.6. Contradictory to the manufacturing PMI data, the service industry is performing better than expected. CEO of the Federal Reserve Bank of St. Louis James Bullard and Federal Reserve Bank of Minneapolis President Neel Kashkari spoke yesterday afternoon about the Fed’s future rate decisions, and both seem to expect more hikes going forward.
French Manufacturing PMI data was also released and came in as anticipated at 46.1. However, French Services PMI data came in at 52.8, below the expected 54.0, indicating a slowdown in the European economy.
A similar outcome arose in the UK with both manufacturing and services PMI numbers released below expectations. Manufacturing was 46.9 versus the expected 47.9 while services data was at 55.1 versus the expected 55.5. This indicates a similar slowing of the UK economy as well.
Data releases in Japan reported year-over-year Consumer Price Index (CPI) numbers at 3%, beating expectations for 2.8% and up from last month’s reading of 2.9%. This is well above the Bank of Japan’s (BoJ) target of 2% inflation. This is a possible indicator that the BoJ may ease up on their yield curve control or potentially raise interest rates in the future which would boost the Yen’s value.
- EUR/CAD: 1.4533 - 1.4618 ▼
- GBP/CAD: 1.6716 - 1.6799 ▼
- AUD/CAD: 0.894 - 0.899 ▼
- USD/CAD: 1.3485 - 1.3549 ▲