USD/CAD: Loonie Flirts With 1.11

 | Feb 27, 2014 12:39AM ET

The Canadian dollar has edged lower on Wednesday. In the North American session, USD/CAD is trading at the 1.11 line. In the US, it's a quiet day, with just two releases on the schedule, led by New Home Sales. There are no Canadian releases on Wednesday.

Another key US release, another disappointing reading - this has been the recent unhappy pattern that we continue to see. The culprit on Tuesday was CB Consumer Confidence. The indicator dropped to 78.1 points, sharply lower than the estimate of 80.7 points in December. The estimate stood at 80.2 points. This is yet another key US release that has pointed downwards in January, following in the footsteps of Building Permits, the Philly Fed Manufacturing Index and Existing Home Sales. The markets will be looking for a turnaround or we could see the US dollar lose ground against its major rivals.

Is the US housing sector experiencing a downturn? Recent US numbers have not looked sharp, and the weak numbers are being felt in the housing industry. Building Permits slid to a five-month low in January, dropping to 0.94 million. The estimate stood at 0.98 million. Existing Home Sales looked awful, dropping to 4.62 million in January, compared to 4.87 million a month earlier. This was well short of the estimate of 4.73 million, and the lowest reading from the key indicator since July 2012. The markets will be hoping for better news from New Home Sales, which will be released on Wednesday.

Last week's Federal Reserve minutes indicated that interest rates are unlikely to rise, even if unemployment drops to 6.5%. Previously, the Fed had said it would consider raising rates at the 6.5% threshold, but with unemployment falling faster than expected, Fed policymakers agreed that it would “soon be appropriate” to revise the Fed’s forward guidance regarding interest rate levels. The minutes also indicated that the Fed will likely continue trimming QE, barring any downturns in the economy.