USD/CAD soars as BoC holds rates

Key Movers

The US dollar continued to edge higher today as risk sentiments continued to sour across the globe. Data releases are light today with the only highlight being the New Home Sales data. The release shows that mortgage applications shrunk by 6.9% two weeks ago and declined another 1% in the recent week. The benchmark US 10-year treasury yields edged higher, recommencing its march towards another peak of 5.0. The 10-year yield was last reported, trading at 4.91. The US Bureau of Economic Analysis is set to release its first estimate of the third-quarter Gross Domestic Product (GDP) tomorrow. Markets are anticipating an annualized growth rate of 4.3% in the third quarter of 2023 versus the previous release of 2.1% in Q2.

The euro continues its negative trajectory against the USD, pressuring the EUR/USD pair to retreat near the 1.0570 level. Markets are considering the possibility of the European Central Bank (ECB) halting its tightening cycle, despite inflation levels surpassing the bank's target and concerns surfacing about the risk of an economic slowdown in the Eurozone. Nonetheless, the ECB is expected to keep the doors open to new hikes if required.

GBP performance was not up to expectations due to concerns of a mild recession in the United Kingdom. Additional factors adding to the poor performance were higher borrowing costs by the Bank of England (BoE), a poor demand outlook, and continuously deepening geopolitical tensions. The BoE is anticipated to hold interest rates at 5.25% in their decision next week. This would be the second consecutive hold and policymakers are expected to lower the growth outlook. Markets are waiting for the Q3 GDP data, which is expected to be published tomorrow.