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USD/CAD Rises on Strong Retail Sales, Industrial Output in January

February 17, 2021 at 15:11 by Andrew Moran

A rolled dollar bill with some banknotes on the backgroundThe US dollar rose against some of its major currency peers in the middle of the trading week as financial markets failed to react positively to strong retail sales data. The greenback has strengthened during the holiday-shortened trading week amid investors continuing to seek safe-haven assets during the broader economic uncertainty.

According to the US Census Bureau, retail trade advanced 5.3% in January, snapping a three-month losing streak. The market had penciled in a gain of just 1.1%. This is the best monthly performance since June, buoyed by higher sales at electronics and appliances, furniture, food, and e-commerce stores.

On an annual basis, retail sales climbed 7.43% last month, up from 2.53% in December.

Inflation was also in focus midweek, with producer prices increasing 1.3% in January. The producer price index (PPI) saw its biggest monthly jump since December 2009 amid higher prices for energy, services, trade, transportation, and warehousing. The core PPI, which excludes food and energy, edged up 1.2%.

January also saw a rebound in industrial and manufacturing output. The Federal Reserve reported that manufacturing production rose 1%, while industrial output increased 0.9%. Capacity utilization clocked in at 75.6%, up from 74.9% in December.

On the housing front, mortgage applications tumbled 5.1% in the week ending February 12, according to the Mortgage Bankers Association (MBA). The 30-year mortgage rate rose to 2.98%.

Financial markets have been treading water on Wednesday as investors wait for the latest news regarding President Joe Biden’s $1.9 trillion stimulus package. Traders are also monitoring the blast of wintry weather that has affected 100 million people across the country and caused widespread power outages in Texas. The coronavirus pandemic is still in focus since weather conditions are delaying the vaccine rollout due to offices shutting down and transportation harder to navigate.

The US bond market was mixed, with the benchmark 10-year Treasury down 0.008% to 1.291%. The one-year note edged up 0.003% to 0.071%, while the 30-year bond shed 0.041% to 2.049%.

The US Dollar Index, which gauges the greenback against a basket of currencies, rallied 0.49% to 90.95, from an opening of 90.71. The DXY has clawed back some of its losses in recent sessions, raising its year-to-date gain to 1.14%.

The USD/CAD currency pair rose 0.28% to 1.2725, from an opening of 1.2690, at 13:56 GMT on Wednesday. The EUR/CAD fell 0.18% to 1.5334, from an opening of 1.5361.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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