By Ketki Saxena
Investing.com -- The Canadian dollar slid to a seven month low against the US dollar today, as markets bet that the Bank of Canada has concluded its rate hike cycle.
As had been widely expected, the Bank of Canada held its key lending rate at 5.0%.
Although the Bank warned that it is prepared to hike rates further, there is growing optimism that the Bank of Canada’s next move could be a rate cut, posing a headwind for the loonie as interest rate differentials with the US widen in favour of the US dollar.
The Bank of Canada also raised its inflation forecast and slashing growth projections, pointing towards a stagflationary environment that is unlikely to be supportive of the loonie’s outlook.
Analysts at Wells Fargo (NYSE:WFC) stated, “We believe the BoC's interest rate pause will be an interest rate peak… As Canadian growth remains subdued and in the absence of further BoC tightening, we also see potential for further Canadian dollar weakness over the next several months.”
The Canadian dollar was also pressured by broad risk aversion in markets as US yields marched higher, boosting the safe haven US dollar.
On a technical level for the pair, analysts at FXStreet note, “On the daily candlesticks, USD/CAD continues to push higher, bolstered by a rising 50-day SMA pushing into 1.3600 on the chart paper. The floor on any bearish corrections is priced in from the 200-day SMA near 1.3475.”
“The immediate ceiling on a bullish continuation sits at early March’s peak of 1.3861, and a break of this level would set a new high for the year on the USD/CAD as the Loonie waffles.”