BoC cuts rates for the first time in over four years
Daily Currency Update
The Bank of Canada (BoC) cut key interest rates by 25 basis points (bps) to 4.75% this morning. The first cut in over four years was expected by markets and led to a rise in the USD/CAD pair which climbed to a four-day high past the 1.37. In a statement from the BoC, the central bank argued that with ongoing evidence of easing inflation, monetary policy no longer needs to be restrictive. BoC governor Tiff Macklem said it is reasonable to expect more rate cuts if inflation continues to ease.Key Movers
The US Dollar Index (DXY) rose by 0.21% in the past 24 hours to trade near 104.364 this morning. US Treasury Yields edged higher overnight, but the 10-year yield only regained a third of yesterday’s drop due to signs of a slackening labour market, the 2-year Treasury Yield was still 22-23 bps below last week’s peak near 5%. Additionally, a recent data release reported by Automatic Data Processing (ADP) showed private payrolls increasing by only 152,000 jobs in May, falling short of the 175,000 jobs expected by economists. This depicted a softer job market, which could influence the future Federal Reserve policy rate decisions.The EUR edged marginally lower so far today to trade around 1.0868. Still, the euro remained generally well supported even as investors anticipate the start of the European Central Bank (ECB) easing cycle during the announcement tomorrow. Markets expect volatility tomorrow if the ECB cuts rates, as expected, for the first time since 2019.
The GBP has been stable over the past 24 hours hovering around 1.2775 as Final UK May Manufacturing Purchasing Managers Index (PMI) data only saw marginal revisions. The Manufacturing Services PMI data, which measures the performance of the manufacturing sector, was left at 52.9 while the Composite index was revised up 0.2 to 53 for a sixth consecutive month of expansion.
Expected Ranges
- EUR/CAD: 1.48569 - 1.49287 ▲
- GBP/CAD: 1.74591 - 0.75338 ▲
- AUD/CAD: 0.908540 - 0.911430 ▲
- USD/CAD: 1.36656 - 1.37415 ▲