By Ketki Saxena
Investing.com -- The Canadian dollar edged higher against the US dollar, as risk sentiment remained robust, with markets appearing to largely shrug off Fed Chair Jerome Powell’s hawkish comments officials “are not confident” that policy is sufficiently restrictive.
Focus now turns to next week’s key US CPI data, as well as a slew of other key US economic data releases.
The risk-sensitive loonie was buoyed by the uptick in market sentiment, edging higher against the dollar today but remaining in the red for the week.
Economic data remained light on the Canadian docket this week. The release of the BoC’s summary of deliberations, and hawkish remarks from BoC Deputy Governor Susan Rogers did little to move the needle on market expectations of cuts from the BoC in April 2024.
Fed Chair Jerome Powell’s comments meanwhile, led to traders pricing in a roughly 68% chance of cuts in June, rather than in May, prior to Powell’s commentary.
Analysts at Scotiabank (TSX:BNS) note, ‘While the CAD’s correlation with spreads has weakened, the sizeable US/Canada yield gap remains a clear impediment for the CAD “
“The bar to more tightening is high—but it might be a little higher in the US than Canada where policymakers remain plainly concerned about sticky core inflation.”
On a technical level for the pair, Scotiabank analysts note “Last week’s high should still effectively represent a firm technical cap on the USD, although a full retest of the 1.39 area now looks a real risk.”
“ Longer run (weekly, monthly) slow stochastic continue to flash “overbought” signals for the USD which should reinforce long run resistance around the 1.39 point. Support into next week is 1.38 and 1.3750; USD weakness below here is needed to steady the CAD technically."