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The Bank of Canada decision next Wednesday kicks off a blockbuster 10-day stretch of central bank decisions that will set the table for the remainder of the year.
Ahead of that, the Canadian dollar is trying to recover and the US dollar is broadly retreating. That comes after the Fed’s Daly reiterated that 4.50-5.00% is still the planned peak for the FOMC in a pushback against bond markets beginning to price above 5%.
That’s sent USD/CAD nearly 200 pips from the intraday high in a few hours. In addition, the loonie is getting help from oil prices which reversed higher. A drag though is natural gas, which is down 7% today on warm weather forecasts.
The support extends to 1.3651, which is just 3 pips from the sesion low. We’re already trying to form a triple bottom, which is just a double bottom that didn’t work.
Whether the loonie can reassert itself will depend on what the Bank of Canada does next week. The most-recent talk has been hawkish but they could signal a slowing pace of hikes ahead. If so, the loonie could sell off.
Alternatively, the most-recent CPI report was hot and today’s retail sales were upbeat. That could lead to more hawkish signals and a broad loonie bid.
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