- The Loonie weakened after Powell’s speech in which he reiterated the Fed’s commitment to tackle inflation.
- Jobless claims in the United States slowed, fueling estimates that the labor market remains tight.
- Even though the Bank of Canada and the Federal Reserve are tightening their monetary policy at the same pace, the safe-haven status of the US dollar will keep USD/CAD under buying pressure.
The USD/CAD trimmed some of its losses from Wednesday, rising towards the 1.3100 area amid risk-on, with most European and US stocks rising, despite central banks continuing to tighten monetary conditions, with the ECB rising 75 basis points.
During the overnight session, USD/CAD started trading near the 1.3110 area and tumbled around the 1.3100-1.3140 range before hitting daily highs of 1.3159. However, it erased those gains and is currently trading at 1.3118, up 0.01% from its opening price.
USD/CAD advances modestly after Powell’s speech
Sentiment-wise, the market is leaning slightly towards the positive. Federal Reserve Chairman Jerome Powell reiterated that the Fed is “strongly committed” to controlling inflation. The market reacted, sending the greenback higher, while the US 2-year yield, the most sensitive to interest rate hikes, rose.
Meanwhile, the US Department of Labor reported that initial jobless claims for the week ending September 3 fell to 222,000, below street analysts’ estimates of 240,000. Sources quoted by Reuters commented that “nothing in this data suggests that the economy is softening further, let alone that it is in a recession.”
Meanwhile, the Dollar Index, a gauge of the dollar’s value against a basket of currencies, gained 0.36% to trade at 109,924, approaching psychological barriers at 110,000, a tailwind for USD/CAD. Meanwhile, US Crude Oil, also known as WTI, recovers some ground and trades at $83.28 per barrel, up 1.08%, curbing USD/CAD gains.
Also, market traders digest the recent rate hike by the Bank of Canada (BoC) on Wednesday. Although the BoC sounded like a hawk and prepared market players, the broad safe-haven status of the dollar, and further rate hikes by the Federal Reserve, could keep USD/CAD under upward pressure.
USD/CAD Key Technical Levels
Source: Fx Street
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