USD/CAD slips as BoC hikes rates
Daily Currency Update
The Canadian dollar rose against the greenback after the Bank of Canada (BoC), in an unexpected decision, raised its policy rate by another 25 basis points (bps) to 4.75% in today’s meeting, this was higher than the market expectations of 4.5%. In the policy statement issued by the BoC, it said that concerns have increased around Consumer Price Index (CPI) inflation getting stuck materially above the 2% target. On a dovish note, the BoC removed the language they noted in April about the BoC being prepared to raise rates further if needed. BoC also noted that it continues to expect CPI inflation to ease to around 3% in the summer, they also referenced inflation gradually falling to 2% target by the end of 2024. The Canadian government 10-year bond yields rose 2.3 bps to 3.297%. West Texas Intermediate (WTI) crude oil touched the 73 levels earlier today but slumped back to 72.63 levels amid the thin clouds over the upcoming Fed interest rate policy decision.Key Movers
In the absence of any high-tier data releases, the EUR/USD is in recovery and edged above the 1.0700 level after it dipped below the 1.0670 level earlier in the trading session. European Central Bank’s (ECB) governing council member Gabriel Makhlouf commented on Wednesday that the key rates are likely to stay there once they reach the "top of the ladder of increasing interest rates.”GBP/USD gained positive traction to snap its 3-day losing streak, now trading at 1.2478 levels. The sterling is supported by market expectations that the Bank of England (BoE) will be more aggressive towards policy tightening to contain persistently high inflation. Markets are anticipating that the BoE may raise interest rates again from 4.5% to 4.75% during its June 22nd meeting and at the same time forecast a roughly 50% to 60% chance that rates will peak near 5.5% in 2023. Headline UK CPI fell less than expected in April and the closely watched measure of core prices rose to a 31-year high.
China disappointed the market in key data releases which showed exports shrank at a higher-than-expected pace in May and imports reduced too, though at a slower pace. The Yuan is currently trading at a 6-month low.
Expected Ranges
- EUR/CAD: 1.4303 - 1.4374 ▼
- GBP/CAD: 1.6635 - 1.6724 ▼
- AUD/CAD: 0.8902 - 0.8979 ▼
- USD/CAD: 1.3334 - 1.3424 ▼