Investing.com – The Canadian dollar strengthened against its US counterpart today, supported by an uptick in crude prices, and hawkish rhetoric from Bank of Canada Governor Tiff Macklem.
At a speech in Montreal today, while Macklem reaffirmed that while rates had reached a sufficiently restrictive level, the BoC was prepared to keep rates higher for longer.
Analysts are widely expecting the Bank of Canada to begin cutting rates in June, and deliver 100 basis points of rate cuts this year.
Analysts at RBC (TSX:RY) are amongst those who share this expectation, noting that the pushing back of BoC expectations in tandem with the Fed is likely to provide a tailwind to the loonie in the second half of the year.
RBC analyst Daria Parkhomenko notes that "If central banks are making 'adjustment' cuts instead of substantial ones due to significant growth concerns, then global central banks reducing rates in H2 2024 and a potential turn in the global business cycle may benefit CAD.”
“CAD is likely to be one of the main candidates for the market expressing a view on global growth.”
In the near term however, RBC analysts expect the CAD to remain range bound between ~1.3100 and ~1.3600 in the first half of 2024.
Meanwhile the USD pared back against a basket of currencies today as Treasury yields declined, investors cashed in on profits following the greenback’s rally driven by a slew of hawkish Fed commentary, including from Fed Chair Jerome Powell.
Markets are now pricing in an under 15% chance of a rate cut in March.
Looking ahead for the loonie loonie this week, traders will be awaiting the Bank of Canada’s latest Summary of Deliberations on Wednesday, and employment data on Friday.