Loonie Soars as BoC Stays Hawkish, USDCAD Tumbles
London: 7 March 2024 (TraderMade): The Canadian Dollar (CAD) surged against the US Dollar (USD) on Thursday, extending gains after the Bank of Canada (BoC) held its key interest rate at 5% on Wednesday, as widely expected.
USDCAD declined 0.63% from yesterday to 1.35143.
Key Takeaways
- BoC maintained its key rate at 5%, signaling a continued fight against inflation.
- Governor Tiff Macklem downplayed the likelihood of achieving 2% inflation in 2024.
- The Canadian Dollar climbed over half a percent against the USD, reaching multi-day highs.
- USDCAD slipped to near one-week lows around 1.3500.
- Weaker USD, mixed Fed signals, and a hawkish BoC contributed to the CAD's strength.
Bullish Loonie Soars on BoC's Hawkish Stance
The BoC's decision to maintain rates and Governor Macklem's cautious comments about inflation boosted the CAD's appeal. Macklem highlighted shelter price inflation as a critical concern and downplayed the possibility of reaching the central bank's 2% inflation target in 2024.
This hawkish stance contrasted with dovish signals from some Federal Reserve officials, further supporting the CAD.
Mixed US Dollar Weighs on USDCAD
On Thursday, the USD faced headwinds from several factors. Mixed signals from the Fed regarding future rate cuts, a rebound in US bond yields, and a softer risk tone limited the USD's recovery from its recent lows.
Looking Ahead
Investors are eyeing further developments in the US, including Fed Chair Powell's second day of testimony and critical economic data releases, for clues on the USD's future direction.
The USDCAD pair will likely remain sensitive to these factors and broader market sentiment in the coming days.
