Home Daily Commentaries CAD regains some ground as USD strength eases

CAD regains some ground as USD strength eases

Daily Currency Update

The Canadian dollar edged up against the US dollar on Tuesday as investors turned their attention to a speech by a senior Bank of Canada official, which could offer clues on the central bank's interest rate outlook.

Surging demand for the US dollar eased on Tuesday as market participants awaited anticipated interest rate hikes by the US Federal Reserve on Wednesday. The dollar had an incredible April, with gains of nearly 6% against a basket of its major rivals. As a result he central bank may make a slightly more aggressive move in tomorrow's monetary policy meeting.

Some central bank policymakers have suggested a 50-basis-point rate hike in order to curb inflationary pressures. The market will be listening out for further guidance from the Federal Reserve around future rate hikes, with some analysts seeing several 50bp hikes over the summer.  Over the last few years, the dollar has been very sensitive to interest rates, so this could be an interesting few months ahead for the dollar.

The Bank of Canada is also expected to raise rates on June 1. USDCAD was down 0.23% trading at 1.28441 at the time of writing.

Key Movers

It’s a big week for the pound, with the Bank of England scheduled to meet on Thursday. As a result, most major GBP currency pairs could remain fairly stagnant until Thursdays meeting. The BoE have hiked rates three times so far this year already and another rate hike this Thursday looks almost certain – it is simply a case of whether it will be a 25bp hike or a 50bp hike (raising the rates to either 1% or 1.25% respectively). The markets are expecting the UK interest rates to reach 2% by the end of the calendar year, so the BoE’s stance on further hikes is in the focus given the recent negative comments around this. GBPUSD was sitting at 1.2497 at the time of writing.

EURUSD bounced slightly on Tuesday but holding just above 1.05 at the time of writing. With the Bank of England and Federal Reserve in major focus this week, the currency could be at risk of losing further ground against both of its major rivals.

Expected Ranges

  • EUR/CAD: 1.35 - 1.3592 ▼
  • GBP/CAD: 1.6056 - 1.6148 ▼
  • AUD/CAD: 0.9075 - 0.9157 ▲
  • USD/CAD: 1.2831 - 1.2912 ▼