The US dollar gained ground against the loonie on Friday following reports of better-than-anticipated producer price index data for November. The sharp rise in the University of Michigan consumer sentiment index for December also enabled the greenback to solidify its gains. The Canadian dollar was weakened by the September 2022 quarter’s capacity utilization rate data, which reflected the first decline since 3Q 2021. Overall, the USD/CAD pair rallied from a low of 1.3569 to a high of 1.3610.
According to the data published by Statistics Canada, the country’s capacity utilization rate inched lower to 82.60% in the September 2022 quarter, from 82.80% in the June 2022 quarter, but surpassed forecasts of 82.20%. The reported figure reflects the first decline in the capacity utilization rate since 3Q 2021.
The decline was primarily led by the manufacturing sector. Specifically, the capacity utilization rate in the manufacturing sector declined by 1.60% to 76.60% in 3Q 2022, reflecting the first decline since 3Q 2021.
Notably, 14 out of 21 major manufacturing sectors, accounting for 60% of the gross domestic product in the manufacturing sector, posted a drop in the capacity utilization rate.
However, the capacity utilization rate in the mining, quarrying, and oil and gas extraction sectors grew by 0.90% to 82.30% in 3Q 2022, reflecting the highest rate since 2Q 2019.
According to the data published by the US Bureau of Labor Statistics, the country’s producer price index (PPI) rose by 0.30% m-o-m in November, following a 0.30% rise in the prior month and a notch higher than the 0.20% growth anticipated by economists.
The increase in the PPI was led by a 0.40% rise in prices for final-demand services in November. In October, prices for final demand services inched up 0.10%. Specifically, the increase in prices for securities brokerage, dealing, investment advice, and associated services surged 11.30% in November and accounted for one-third of the increase in final demand services.
Also, the index for final demand goods increased by 0.10% in November, following a 0.60% rise in the earlier month. Specifically, the prices for final-demand foods jumped 3.30% in November.
On a y-o-y basis, the producer price index surged 7.40% in November 2022.
Excluding foods, energy, and trade services, the core PPI rose by 0.30% m-o-m in November, following an increase of 0.20% in October and in line with economists’ estimates. On a y-o-y basis, the PPI surged 4.90% in November 2022.
According to the preliminary data published by the University of Michigan, the US consumer sentiment index rose to 59.10 in December from 56.80 in November, which pleased economists who were expecting only a marginal increase to 56.90.
The current conditions index grew to 60.20 in November from 58.80 in October. Likewise, the expectations index improved to 58.40 from 55.60, reflecting the highest level since April 2022.
In the meantime, inflation expectations for the upcoming year eased to 4.60%, reflecting the lowest level since September 2021. However, the five-year inflation outlook remained unchanged at 3%.
The solid US economic data is expected to keep the USD/CAD pair range-bound with a slight bullish bias in the near term.
The historical price chart indicates that the USD/CAD pair is rising after testing the support at 1.3580. The next resistance is anticipated only near 1.3875. Additionally, the currency pair is trading above its 50-day moving average while the stochastic indicator is in the bullish zone. Therefore, we anticipate the currency pair to remain in an uptrend in the days ahead.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
