Home Daily Commentaries USD/CAD pair drops to near two-month lows

USD/CAD pair drops to near two-month lows

Daily Currency Update

After the Bank of Canada (BoC) left its policy rate unchanged at 4.5% yesterday, the USD/CAD pair closed its third straight day in negative territory and continues to push lower today. USD/CAD dropped to a nearly two-month low under the 1.34 level. The USD remained under persistent selling pressure for the third straight day amidst expectations that the Fed is almost done with its rate-hiking spree which turned out to be one of the key factors exerting pressure on USD/CAD. The Federal Open Market Committee’s (FOMC) March meeting minutes showed policymakers considering pausing interest rate increases after the failure of two regional banks, SVB and Silvergate. This, along with a largely positive outlook in the equity markets continued to weigh on the greenback, dragging the USD/CAD pair even lower. The upside in crude oil prices undermined the commodity-linked Loonie with West Texas Intermediate oil trading around 82.75 levels after the United States inflation data matched expectations.

Key Movers

The US Producer Price Index (PPI) declined to 2.7% year-over-year in March from 4.9% the previous month, lifting hopes on disinflation is progressing smoothly. Data from China showed that the trade surplus narrowed to $89.19 billion in March from $116.8 billion in February. This reading was better than the market expectations for a surplus of $39.2 billion. The dollar index (DXY) dropped to the 101.2 level, its lowest since February.

The sterling hit a 10-month high of $1.253 against USD. GBP was last up 0.2% at the $1.251 level, on the way to its third consecutive daily increase. UK’s manufacturing and GDP data showed no growth in February as strikes by public workers lowered output. UK Finance Minister, Jeremy Hunt, noted that the “economic outlook is looking brighter than expected and we are set to avoid recession thanks to steps we have taken.”

The euro recorded notable gains against the USD and continued to move higher in the early session today. The pair was last seen trading at its highest level since early February, just slightly above 1.1000. Industrial production data from the Eurozone showed an uptrend in February, indicating that the manufacturing sector recovery is holding ground. The Eurostat’s latest publication showed Eurozone’s industrial output rose by 1.5% month-over-month versus the expected 1.0% and the previous print of 0.7%.

Expected Ranges

  • EUR/CAD: 1.4741 - 1.4800 ▲
  • GBP/CAD: 1.6746 - 1.6794 ▼
  • AUD/CAD: 0.8986 - 0.9051 ▲
  • USD/CAD: 1.3375 - 1.3472 ▼