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Canadian Dollar Gains Against USD, G-10 Currencies After BoC's Monster 100bps Move

Forex Jul 13, 2022 14:45
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By Ketki Saxena 

Investing.com -- The Canadian dollar gained against its US counterpart today following the Bank of Canada’s larger than expected rate hike. 

As of 2:45 p.m ET,  the USD/CAD pair was down 0.46% in the day’s trading, at C$1.2960 to a after touching 1.2978 before the U.S. inflation data and  1.3060 - its weakest level of the day - immediately following the BoC announcement. 

However, the dollar-loonie pair still struggles to break out above 1.30, a dynamic that analysts expect to persist for the coming weeks. The Canadian Dollar has struggled of late as the US Dollar remains strong and oil continues to weaken over recession fears. 

The Bank of Canada’s outsized move also helped the loonie climb against its G10 peers, as the Canadian central bank leapfrogs over major developed market peers on the path towards tightened monetary policy. The aggressive pace of tightening cements the Canadian dollar’s position as one of the best-performing major currencies right now. 

Strategists at Canadian Imperial Bank of Commerce, likewise said that the loonie remains well positioned to do well against non-US currencies, but sees downside risks for it against the greenback.

Further gains on the loonie were capped by continued losses in crude, a major Canadian export, although Analysts at Monex Europe note that the Bank of Canada’s actions “help shield the loonie from further downside pressures stemming from commodity and equity benchmarks”. 

The greenback meanwhile continued to gain as hot U.S. inflation data - 9.1% as per today’s data, raised bets for an outsized move from the Federal Reserve later this month. 

Daily Forex notes that “While US CPI was unable to push USD/CAD through overhead resistance, the upcoming FOMC meeting at the end of the month may begin to emerge as the potential catalyst for a topside breakout.”

Canadian Dollar Gains Against USD, G-10 Currencies After BoC's Monster 100bps Move
 

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