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The Canadian dollar strengthened against its U.S. counterpart on Wednesday as investors cheered a signal by the Federal Reserve that it is nearing a pause in its tightening campaign. The Canadian dollar was trading 0.4% higher at 1.3660 to the greenback, or 73.21 U.S. cents, approaching its strongest level in recent weeks. "The Fed is clearly doing its best to put on a brave face by raising rates and sticking with quantitative tightening," Royce Mendes, head of macro strategy at Desjardins, said in a note.
The Canadian dollar weakened against its U.S. counterpart on Tuesday, pulling back from an earlier two-week high, as domestic inflation data supported the Bank of Canada's recent decision to pause its interest rate hiking campaign. Canada's annual inflation rate slowed more than expected to 5.2% in February, its lowest level in 13 months, benefiting from a comparison to last year's strong price increase. "These are encouraging trends that basically confirms the pause that the Bank of Canada initiated at its last meeting," said Michael Goshko, senior market analyst at Convera Canada ULC.
The British pound has shot straight up in the air during the trading session on Tuesday, after doing the same thing on Monday.
The Canadian dollar is set to rise later this year as the global economic outlook turns more favorable for commodity-linked currencies and investors bet central banks will cut interest rates in 2024, according to a Reuters poll released on Wednesday. In three months, however, the loonie is set be little changed at 1.34 per U.S. dollar, or 74.63 U.S. cents, according to the median forecast from currency analysts, though that was slightly stronger than January's forecast of 1.35. "China is one of the big fundamental drivers for why there is growing optimism ... With that demand coming back, it's going to be supportive of the global economy and it could be a boost to pro-cyclical currencies," said Jay Zhao-Murray, market analyst at Monex Canada Inc.
It’s all happening for investors and traders this week, with a plethora of significant news releases out around the world.
Canada's dollar will rally this year, but much of the upswing will have to wait until a period of uncertainty passes for the domestic and global economies following aggressive tightening by central banks in 2022, a Reuters poll forecast. The loonie will edge 0.6% higher to 1.35 per U.S. dollar, or 74.07 U.S. cents, in three months, according to the median forecast of currency analysts. "We expect to see some mild CAD weakness in the first half of 2023 ... as last year's rate hikes work their way through the economy and lead to a mild recession," said George Davis, chief technical strategist at RBC Capital Markets.
The Canadian dollar weakened against its U.S. counterpart on Thursday, pulling back from a one-month high, as investors worried about the Federal Reserve's policy outlook and data showed Canada's trade balance swinging to a deficit. The loonie was trading 0.7% lower at 1.3565 to the greenback, or 73.72 U.S. cents, after touching its strongest intraday level since Dec. 5 at 1.3467. Wall Street's main indexes fell and the U.S. dollar rallied against a basket of major currencies as fresh evidence of a tight labor market and hawkish comments from Fed policymakers deepened fears of elevated interest rates for longer than expected.
The Canadian dollar strengthened against its U.S. counterpart on Monday as investors bet that easing of COVID-19 curbs in China would boost demand for oil, one of Canada's major exports, with the currency rebounding from a six-week low. The loonie was up 0.3% at 1.3660 per greenback, or 73.21 U.S. cents, after trading in a range of 1.3624 to 1.3694. "The market is beginning to feel more constructive on China's reopening," said Adam Button, chief currency analyst at ForexLive.
The Canadian dollar was little changed against the greenback on Monday, holding near a multi-week low, as investors awaited possible clues on the Bank of Canada policy outlook and then a Federal Reserve interest rate decision later this week. Money markets see a roughly 40% chance that the central bank would hike by 25 basis points at its next policy decision on Jan. 25. Governor Tiff Macklem's prepared remarks are due for release at 3:25 p.m. ET (2025 GMT).
Canada's dollar will rally over the coming year as major commodity consumer China loosens its COVID-19 restrictions and the Federal Reserve potentially concludes its campaign to increase interest rates, a Reuters poll showed. The loonie has weakened over 7% against the U.S. dollar since the start of 2022, with almost all of the decline coming since mid-August. According to the median forecast of 35 currency analysts surveyed Dec. 1-6 the currency will rebound 1.1% to 1.35 per U.S. dollar, or 74.07 U.S. cents, in three months, compared with November's forecast of 1.36.