CAD falls by 0.3% against the USD
Thursday 2 February, 2023
Daily Currency UpdateThe Canadian dollar lost value relative to the USD on Thursday as oil prices decreased; however, the drop was moderated by the Fed’s statement indicating their willingness to cut interest rates. With the Bank of Canada potentially putting rate hikes on hold, the likelihood of over-tightening has decreased, and the possibility of a domestic recession has receded, providing some support for the CAD. West Texas Intermediate Oil dips slightly to trade around the 76.000 mark while USD/CAD trades below 1.33260.
Key MoversThe Federal Reserve raised its key interest rate corridor yesterday by 25 basis points (bps). This moved the rate from 4.50% to 4.75%, as expected. The US economic docket featured the weekly Initial Jobless Claims report published by the US Department of Labor. The data showed that there were 183,000 initial jobless claims in the week ending January 28. Following the previous week's downward trend and surpassing the market expectation of 200,000.00. Data from jobless claims continues to suggest that the job market is strong and stable. The dollar index bottomed out around the 100.900 mark following its sharp decline yesterday. This was triggered by the Fed delivering a 25bps hike and FOMC Chairman Jerome Powell's dovish remarks regarding the state of inflation in the US. Powel stated that the “disinflationary process has started.” Powell went on to say that there is a good chance the Fed will keep its benchmark interest rate below 5% and that they can bring inflation down by 2% without too much harm to the economy. As anticipated, the European Central Bank raised its key interest rate by 50 basis points during Thursday’s policy meeting. The ECB detailed in its policy statement that given underlying inflationary pressure, it plans to raise interest rates by another 50 basis points at its next meeting in March. Following the ECB’s announcement of a 50bps hike, the EUR fell against the USD. The pair is trading around the 1.09200 mark after peaking above 1.10200. In line with expectations, the Bank of England (BoE) increased the policy rate by 50bps to 4%. The British pound fell against the dollar on Thursday trading below 1.23000 after the BoE raised its main interest rate to the highest level since 2008. The BoE hinted that rates were near their peak.
- EUR/CAD: 1.464 - 1.453 ▼
- GBP/CAD: 1.6471 - 1.6328 ▼
- AUD/CAD: 0.9497 - 0.9423 ▼
- USD/CAD: 1.3264 - 1.3368 ▲