Home Daily Commentaries USD/CAD pair hits yearly low

USD/CAD pair hits yearly low

Daily Currency Update

USD/CAD remains under pressure, reaching its lowest level since September 2022. Despite this, the pair is hovering around 1.3160. In other news, oil experienced a rise of 1.0%, reaching a two-week high of around $72.70 and settling near $70.50. The surge in oil prices can be attributed to expectations of additional stimulus measures from China and an expansion in US refining capacity. This trend is prominent given the negative sentiment surrounding the USD.

Key Movers

The dollar index (DXY) remains around the 102 mark today, staying close to its lowest level in six weeks. This follows Federal Reserve Chair Jerome Powell's testimony to Congress, which did not bring any significant surprises to the market. Powell mentioned that further rate increases are likely in the future, citing persistent inflation above the Fed's 2% target, despite some indications of easing price pressures. He emphasized that the timing of rate adjustments would be determined at each meeting and suggested a more gradual approach to raising rates. Market analysts noted that Powell’s hawkish stance was already anticipated, with expectations that the central bank would raise rates by 25 basis points (bps) in July and halt further hikes thereafter. Investors are now eagerly awaiting Powell's additional remarks when he appears before the Senate Banking Committee today. Data released today revealed that the number of Americans who applied for unemployment during the week ending on June 17th reached 264,000. This surpasses market expectations and matches the upwardly revised value from the previous week. This figure represents the highest level since October 2021 and is in line with recent data indicating a slight easing in the US labor market.

The euro showed strength today, surpassing the 1.10 mark and reaching its highest point in six weeks. This surge was fueled by anticipations of increased interest rates by the European Central Bank (ECB). These expectations arise amid ongoing worries regarding elevated inflation levels within the region. Notably, the ECB executed its eighth consecutive interest rate hike and hinted at the potential for similar action in July.

Following the monetary policy decision of the Bank of England (BoE), the pound initially experienced gains but eventually reversed its course and is trading below 1.28. Contrary to most investors’ expectations, the BoE opted to increase rates by 50 bps to 5%, instead of a smaller 25 bps hike. The higher hike was fueled by May’s inflation data released on Wednesday, which exceeded expectations. In statements, policymakers also emphasized the potential for further increases in rates if there is evidence of sustained inflationary pressures.

Expected Ranges

  • EUR/CAD: 1.4435 - 1.4485 ▼
  • GBP/CAD: 1.6771 - 1.6827 ▼
  • AUD/CAD: 0.8896 - 0.8953 ▼
  • USD/CAD: 1.314 - 1.3192 ▲