The U.S. dollar rallied to a new 2-month high against its Canadian counterpart on Tuesday after Federal Reserve Chair Powell’s hawkish speech in front the US House Financial Services Committee.
Last week, the USD/CAD pair was given a boost following the release of abysmal Canadian retail sales numbers for December, which revealed that core retail sales - excluding automobiles - had tanked 1.8%.
The unexpected news pushed Canada's currency to a two-month low of 1.27585 vs. the USD, on February 22nd, as FX traders digested the numbers and started pricing in potential rate-hikes.
But since last week's bearish news, market participants began shifting their attention to Powell’s speech on Tuesday, which signaled further rate increases in 2018 due to improving labor markets, higher-than-expected wage growth and rising inflation expectations.
While the exchange rate between the USD and the CAD closed on Tuesday at a two-month high of 1.27757, continued short-term bullish momentum may push the FX pair towards the big resistance level of 2017, located at 1.2900.
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