Wrap Up
The Canadian dollar firmed against its U.S. counterpart on Thursday, approaching last week’s eight-month high, as investors focused on the less-dovish policy guidance coming from the Bank of Canada compared with that of the Federal Reserve.
The outlook for the U.S. dollar remained grim after Federal Reserve Chair Jerome Powell’s bleak comments on the U.S. economy, which bolstered expectations of an interest rate cut later this month.
Chances of an interest rate cut this year by the Bank of Canada were less than 35%, data from the overnight index swaps market showed. Over the same period, the market expects at least two rate cuts from the Fed.
New home prices in Canada declined 0.1% in May, after prices were flat for the previous three months, Statistics Canada said in a report yesterday.
Levels and recommendations
World shares came within a whisker of posting their first weekly loss since May today and the US dollar was down for a third day running, as even stronger than expected U.S. inflation failed to shake bets on US Federal Reserve interest rate cuts.
Data out of China showed that Beijing’s exports fell in June as the United States ramped up trade pressure, while imports shrank more than expected, pointing to further strains on the world’s second largest economy.
Comments by Chicago Fed President Charles Evans scheduled later today and New York Fed President John Williams on Monday will provide a chance to gauge how dovish the US Fed is.
The Canadian dollar continues to trade stronger at 1.3045 against the US dollar on broad weakness in the US dollar. The loonie finds continued strength from the rising monetary divergence between BoC and the US Fed and stable crude prices. We see a strong possibility of the USDCAD dipping to 1.2970 levels in near-term.