Daily digest market movers: USD/CAD loses steam at five-month highs
Canadian Dollar is trading 0.2% higher on Wednesday after having lost nearly 2% in a five-day sell-off.
The hawkish Fed stance, confirmed on Wednesday by Fed Chair Powell, and the dovish outlook of the BoC, which is expected to start cutting rates in June, are acting as a headwind for the CAD.
On Wednesday, Fed Chair Powell warned about the lack of progress on inflation, suggesting that the bank will have to keep rates at restrictive levels for a longer time.
Bets for a Fed rate cut in July have dropped to 37% from 50% at the beginning of the week. Investors are now pricing in 40 bps of cuts in 2024, down from 150 BP in January.
EIA Crude Oil stocks have increased by 2.735 million barrels. against expectations of 1.65 million. Incrementally, this is weighing further on Crude prices and also on the CAD.
On Tuesday, Canadian inflation data showed mixed figures. Headline CPI accelerated to a 2.9% yearly rate from 2.8% in the previous month. The Core CPI eased to 2%, its lowest level in three years.
These figures endorse the view that the Bank of Canada will be able to cut rates soon, probably in June, and increase negative pressure on the pair.
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