Home Daily Commentaries The Loonie surges strongly after the Fed confirms its dovishness

The Loonie surges strongly after the Fed confirms its dovishness

Daily Currency Update

CAD - Canadian DollarThe USD/CAD pair is falling by almost 1 percent, making the Loonie one of the biggest winners after the Norwegian Krone and the Swiss Franc, both of which rallied versus the Greenback by 1.8 and 1.1 percent respectively. The most important driver was the Fed and its FOMC rate decision to cut interest rates if the economic outlook doesn’t improve in the coming months. Fed Chairman Jerome Powell said the bank will keep its interest rates at 2.5 percent for now, but he suggested that easing would be necessary if the trade war continues slowing economic growth. The Fed, as expected, also referenced that it would be “patient” on rates and projected a larger miss from its two inflation targets this year. In contrast with the U.S. inflation expectations, Statistics Canada posted a higher inflation number yesterday with the release of its CPI numbers. This comparison was the most crucial catalyst that made the Loonie rally strongly against the U.S. dollar. Furthermore, in the case of the Loonie (and the Norwegian Krone), the rally was exacerbated when a clobbered U.S. dollar sent commodities prices higher, such as crude oil which is increasing by around 3.5 percent at the time of this writing. Gold is also surging and having a breakout to the upside of almost 2 percent.

Key Movers

The Bank of Japan and the Bank of England both left their benchmark interest rates unchanged. The Euro is rising versus the British Pound by 0.30 percent. The BoE warned that the likelihood of the U.K. leaving the European Union without a divorce deal had risen. The bank said, If Brexit goes fluently, it expects to raise interest rates over the next few years slowly. Fundamentally speaking, the BoE cut the Q2 GDP estimate to 0 percent from +0.2 percent quarter to quarter and said that inflation expectations remain well-anchored. It also said that CPI will likely fall below the 2 percent target later this year. The BoE added that underlying economic growth in the U.K. appears to have weakened slightly in the first half of 2019 and the downside risks have increased since May as global trade tensions intensify. The EUR/GBP pair is rising today, but, technically speaking, it looks exhausted to the upside. Whether it stays on an uptrend will depend on whether it retests some lower levels to have more propulsion to go even higher.

Expected Ranges

  • USD/CAD: 1.3150 - 1.3243 ▼
  • EUR/CAD: 1.4832 - 1.4927 ▼
  • GBP/CAD: 1.6710 - 1.6781 ▼
  • AUD/CAD: 0.9120 - 0.9161 ▼
  • NZD/CAD: 0.8650 - 0.8690 ▼