Loonie strengthens against the USD
Daily Currency Update
The Canadian dollar gained against the USD as the yield on benchmark government debt slipped. The Loonie followed strongly on the back of the recovery in Canada’s main export item, West Texas Intermediate (WTI) crude oil, as well as hopes of no rate hike from the US Fed. Although there were mild losses noted near the1.3300 mark at the time of writing. The Canadian government’s benchmark 10-year bond yields fell 6.2 basis points (bps) to 3.403%. As mentioned, the black gold, West Texas Intermediate (WTI) crude oil, printed minor gains around the 69.60 mark. WTI tested the territory above 70.00 earlier today, this in turn is benefiting the Canadian dollar’s performance. The oil prices are certainly loving the neutral policy predictions for the interest rates by Fed. In the meantime, the markets continue to expect that the Bank of Canada (BoC) may remain hawkish in raising interest rates further due to resilience in the Canadian economy. BoC Governor, Tiff Macklem had surprisingly raised the interest rates by 25 bps to 4.75% last week.Key Movers
The US dollar has erased its previous gains and lost ground against most of its six major peers. Losing notably against the sterling at a one-month high near 1.2670, the DXY was seen trading at the 103 levels. The Federal Reserve is scheduled to announce its interest rate policy decision this morning and soon after will publish the revised brief of Economic Projections (SEP). Markets are awaiting the outcome of this policy meeting and anticipating the Fed will the policy rate unchanged; however, at the same time expecting a strong probability for at least one more rate hike this year.The EUR/USD pair shot up to near the 1.0820 levels after US PPI data showed wider-than-expected deflation. The Eurozone is awaiting the interest rate decision by the European Central Bank (ECB) tomorrow. It is anticipated that the ECB President, Christine Lagarde may raise interest rates by 25 basis points (bps) to 4%.
The sterling soared dramatically as markets are expecting the inflation figures from the UK to remain persistent. The GBP/USD pair claimed a fresh monthly high after a comparative analysis of inflation and employment was published. This analysis indicated that the Bank of England (BoE) may be poised to raise interest rates further to control sticky inflation. Soaring food and worrying shortages of labor are a concern for the policymakers as the UK’s current inflationary pressures are four times higher than the desired rate. GBP/USD was last seen refreshing its monthly highs above the 1.2660 levels. The next important read for UK inflation will be the Consumer Price Index (CPI) on June 21 and the interest rate policy decision on June 22.
The black gold, West Texas Intermediate (WTI) crude oil, printed minor gains around the 69.60 mark paring its weekly losses. WTI tested the territory above 70.00 earlier today, this in turn is benefiting the Canadian dollar’s performance. The oil prices are certainly loving the neutral policy predictions for the interest rates by Fed.
Expected Ranges
- EUR/CAD: 1.4341 - 1.4421 ▲
- GBP/CAD: 1.6762 - 1.6869 ▲
- AUD/CAD: 0.8996 - 0.9078 ▲
- USD/CAD: 1.3279 - 1.3318 ▼