- The dollar resumes its downward trend and is back below 1.3600.
- The Canadian dollar rallied after the BoC’s “interest rate hike”.
- USD/CAD stands at 136 at the end of the year, despite the fact that the BoJ has curbed its growth — BofA.
The USD resumed its downtrend on Wednesday, retreating below 1.3600 after rallying as high as 1.3650 following today’s Bank of Canada bearish monetary policy decision.
Canadian dollar falls after BOC monetary policy decision
The Bank of Canada announced a hike of 50 basis points, instead of the 75 basis points that the market had expected, and pointed to further monetary tightening in the future, even if, as they believe, the economy could enter a slight recession. in the coming quarters.
According to the statement, future hikes will be influenced by the bank’s assessment of “how monetary policy tightening is working to curb demand, how supply-side challenges are being resolved, and how inflation and growth expectations are responding.” inflation”.
Elsewhere, the US dollar remains vulnerable as the market begins to assume a slowdown in the Fed’s tightening cycle. Although the 75 basis point hike in November is already priced in, recent unfavorable macroeconomic data in the US suggests that the bank’s sharp rate hike is hurting economic growth, which could add pressure for the bank to approve a rate hike. of 0.50% in December.
USD/CAD, seen at 1.36 at the end of the year — BofA
Bank of America FX analysts see the pair at 1.36 by the end of the year, despite the slowdown in the BOC: “We expect that the actual realization of a move lower in the BOC will allow CAD rates to continue to outperform from USA”. USD/CAD appeared to be overbought in September due to the August inflation surprise and broad risk-off sentiment in the market. The latest inflation data should provide some short-term lift for the CAD ahead of the BOC meeting… We maintain our year-end forecast at 1.36 for USD/CAD.”
Technical levels to watch
Source: Fx Street
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