USD/CAD: Slight Gains In Subdued Trade

 | Jul 21, 2014 12:26PM ET

The Canadian dollar has posted small gains on Monday, as USD/CAD trades in the mid-1.07 range late early in the North American session. There are no Canadian or US releases to start off the week, so traders can expect light trading in the North American session. On Friday, Canadian data was mixed. Wholesale Sales jumped 2.2%. However, Core CPI declined by 0.1%, its worst showing in 2014. In the US, UoM Consumer Sentiment remained steady at 81.3 points, but this was well short of the estimate of 83.5 points.

Recent US data has been mixed, but employment numbers continue to shine. On Thursday, Unemployment Claims dropped slightly to 302 thousand, beating the estimate of 310 thousand. This figure marks a seven-week low, as the economy continues to churn out impressive employment data. With Janet Yellen telling Congress that a rate hike could be pushed forward if inflation and employment data exceeds expectations, improving employment data will put more pressure on the Fed to raise rates.

Federal Reserve Chair Janet Yellen concluded two days of testimony on Capitol Hill last week. Yellen declined to answer questions about when the Fed would begin to raise rates, but she did acknowledge that most economists expect the Fed to make a move in the third quarter of 2015. On Tuesday, the dollar moved higher when Yellen said that the economy still required monetary stimulus, but rates could increase sooner than expected if inflation and job numbers improved more quickly than anticipated. The Federal Reserve's asset purchase program (QE) has flooded the economy with over $2 trillion, keeping interest rates at ultra-low levels, but the Fed has been trimming the program since last December, when it stood at $85 billion/month. Currently, the Fed is pumping $45 billion/month into the economy, and the next taper is expected in August, with plans to terminate QE in October.