USD/CAD fades bounce off intraday low as it drops to 1.3360 heading into Thursday’s European session, after refreshing the monthly bottom at 1.3320 the previous day. In doing so, the Loonie pair cheers the US Dollar weakness while paying little heed to the mildly offered WTI crude oil price, which is Canada’s main export earner.
On Wednesday, the Bank of Canada (BoC) surprised markets by announcing 25 basis points (bps) increase to increase the benchmark interest rate, to 4.75%, versus market expectations supporting no change in the previous rate of 4.50%. In its policy statement, the BoC said that concerns have increased that Consumer Price Index (CPI) inflation could get stuck materially above the 2% target. That said, the BoC statement appeared dovish as it removed the April language about how the Canadian central bank is prepared to raise rates further if needed.
Elsewhere, WTI crude oil prints mild losses near $72.50 while failing to extend the previous day’s corrective bounce, eyes the second consecutive weekly loss. In doing so, black gold bears the burden of the market’s fears of slower economic growth due to hawkish central bank actions.
It should be noted, however, that the US Dollar Index (DXY) remains pressured despite jittery markets amid the latest increase in the bets on the Federal Reserve’s 25 bps rate hike in July, even as the June Federal Open Market Committee (FOMC) is likely to keep the rates unchanged.
Against this backdrop, S&P500 Futures extend Wednesday’s losses to 4,265, down 0.25% intraday, whereas the US 10-year Treasury bond yields grind near 3.79% after rising the most in five weeks the previous day.
Looking ahead, comments from Bank of Canada (BoC) Deputy Governor Paul Beaudry and Canada’s monthly jobs report will be the key to watching for clear directions ahead of next week’s Fed meeting.
Despite the latest weakness, the USD/CAD pair is yet to smash a seven-month-old ascending support line, around 1.3330 at the latest, which in turn joins the nearly oversold RSI (14) line to suggest a corrective bounce in price.
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