USD/CAD rises back above 1.2600 despite strong crude oil as buck gets post-ECB meeting boost
- USD/CAD has reversed higher from the low 1.2500s to back above 1.2600 amid a broadly stronger US dollar.
- The buck perked up after a not as hawkish as expected ECB meeting, preventing higher oil prices from helping CAD.
USD/CAD reversed early session losses that saw it drop to fresh weekly lows below its 21-Day Moving Average around the 1.2520 mark and looks set to close out the day just to the north of the 1.2600 level. The FX market tone switched in wake of Thursday’s not as hawkish as anticipated ECB monetary policy announcement, with the US dollar picking up across the board, a trend also helped by a sharp rise in US yields on the day.
US economic data in the form of a mixed March Retail Sales report and a stronger than expected Michigan Consumer Sentiment survey didn’t seem to have much of an impact on the Fed tightening narrative, nor subsequently on FX market sentiment. Nor did remarks from influential FOMC member and NY Fed President John Williams, who threw his support behind the idea of 50 bps rate hikes at coming meetings.
Nonetheless, buck strength prevented the Canadian dollar from taking advantage of a further rise in global crude oil prices, and saw USD/CAD rally back to not that far below Wednesday’s pre-hawkish BoC meeting levels. To recap, the Canadian central bank lifted interest rates by 50 bps and initiated its QT programme (as of 25 April) as expected, but also signaled a risk of more 50 bps rate hikes ahead.
Though the US dollar remains strong across the board, as has been the case now for weeks, the backdrop of an even more hawkish BoC and resilience in global commodity prices suggests that the USD/CAD bears shouldn’t lose hope. With European and North American markets shut on Friday for Easter holidays, trading conditions volumes will be very low during the upcoming Asia Pacific session.