Home Daily Commentaries A relief rally in the financial markets pushes the Canadian dollar higher versus the US dollar

A relief rally in the financial markets pushes the Canadian dollar higher versus the US dollar

Daily Currency Update

There is a relief rally in the North American equity indices in the US and Canada; however, crude oil continues to weaken, and the Canadian dollar has increased only 0.1% towards 0.7545.

The CAD/USD pair opened the trading day with the Canadian dollar down by 0.3% to levels we haven't seen since 2020. The CAD has also been trimmed against most G10 currencies. However, at the time of this writing, the Canadian dollar is only falling against the British Pound and the Aussie dollar, which are the two major currencies that lost the most last week.

Key data points this week will be released tomorrow, including Tuesday's CAD inflation number for August. The consensus is for a 7.3% headline number, down from the 7.6% we saw last month. This or lower could signal that the BoC can ease its interest rate hike program. On Wednesday, the FOMC in the US will take the spotlight with a probable 75 bps hike.

Key Movers

Starting this week, all eyes are on central banks. We have announcements this week from central banks in the US, Japan, Switzerland, Sweden, and Norway.

As of today, at the time of this writing, the S&P 500 is down 19% year-to-date, with the DXY US dollar index up almost 15%. It is only two days before the next Fed meeting, and, for now, the US dollar might keep the bid, despite other G-10 central banks catching up with rate hikes of their own.

In Europe, the German central bank warns that winter conditions will likely worsen. Furthermore, ECB vice president Luis de Guindos said further interest rate increases would depend on economic data.

The US dollar weakens, driven by profit-taking after a strong rally last week. This week's FOMC meeting in the US might not be just about the magnitude of the rate hike, but the path after that. Market participants expect a third successive 75 bps rate hike from the FOMC on Wednesday, followed by two 50 bps increases in November and December.

Expected Ranges

  • EUR/CAD: 1.3263 - 1.3315 ▼
  • GBP/CAD: 1.5130 - 1.5166 ▲
  • AUD/CAD: 0.8889 - 0.8922 ▲
  • USD/CAD: 1.3246 - 1.3359 ▼