The Canadian dollar is likely to be in focus today, after dipping to one-week lows on Tuesday. The much-awaited inflation report is also scheduled to be released today.
Context: The Canadian dollar hit a six-day low against the US dollar on Tuesday, as the coronavirus outbreak weighed on trader sentiment. The decline in Canada’s manufacturing sales only worsened the negative sentiment. As Canada is a major exporter of oil and other commodities, its economy growth would be hit by any global slowdown.
Details: Canadian factory sales declined for the fourth consecutive month, down 0.7% in December. The data was hurt by weak sales in motor vehicle assembly and aerospace products. Although a downturn was widely anticipated, the magnitude of the decline took the market by surprise.
Equity markets also drifted lower after Apple warned it could miss its sales forecast due to the coronavirus outbreak in China. The tech giant’s warning highlighted the threat coronavirus poses to global economic growth.
The Lonnie traded 0.2% lower at 1.3268 against the greenback. Canadian government bond yields also weakened on Tuesday, with the 10-year yield falling 3.2 basis points to 1.332%.
Why it matters: Following the Canadian dollar’s recent weak performance against the greenback, all eyes are on the inflation report, scheduled for release today. The inflation rate is a major consideration in the Bank of Canada’s interest rate decision. Experts indicate a 50% probability of Canada’s central bank easing interest rates as early as April.
What to watch: Canada’s Consumer Price Index, which came in flat in December, is expected to rise 0.2% in January. Preliminary estimates show a 1.8% increase in core consumer prices in January, after December’s 1.7% rise.
Other Markets: Most US indices closed lower on Tuesday, with the Dow and S&P 500 down 0.56% and 0.29%, respectively. The Nasdaq 100 edged higher by 0.02%.