| Wrap Up |
| The Canadian dollar strengthened against its broadly weaker U.S. counterpart, moving closer to last week’s eight-month high, as the Bank of Canada showed no sign that it would match potential interest rate cuts from the U.S. Federal Reserve. The BoC left its benchmark interest rate on hold at 1.75% as expected and made clear it had no intention of easing monetary policy, while highlighting the risks of trade wars. Meanwhile, Fed Chairman Jerome Powell reinforced expectations the U.S. central bank will cut interest rates for the first time in a decade at its next monetary policy meeting later this month, saying trade uncertainties and concerns about the global outlook continued to exert pressure on the American economy. Canada’s yield curve steepened in sympathy with the U.S. curve. The two-year bond rose 10.5 Canadian cents to yield 1.583% and the 10-year bond flat to yield 1.584%. |
| Levels and recommendations |
| Global stocks rally faded and global bond yields rose after jitters over corporate earnings and trade doused an early rally fuelled by enthusiasm over Federal Reserve Chairman Jerome Powell cementing rate cut expectations. The US dollar index fell against a basket of major currencies to 96.876, extending losses for a second straight session after reaching a three-week peak as the rate cut prospects weighed on the dollar. Crude oil prices climbed to a six-week high as oil rigs in the Gulf of Mexico were evacuated before a storm, while an incident with a British tanker in the Middle East highlighted ongoing tensions. The Canadian dollar is trading stronger below its long-term support of 1.3070 levels after BoC made clear about its intention on interest rate. The loonie got support from sharp selloff in USD which got triggered after Fed dovish remark along with an uptick in crude oil prices. The next immediate support for the USDCAD pair is placed at 1.3025 and the broader support is at 1.2975 levels. |