By Ketki Saxena
Investing.com – The Canadian dollar weakened against its US counterpart today, with risk-aversion dominating as investors push back their bets for rate-cuts from the US Federal Reserve.
The minutes from the Fed’s last meeting of 2023 further added to uncertainty about the timeline of rate cuts.
While the minutes acknowledged that “participants viewed the policy rate as likely at or near its peak for this tightening cycle”, the minutes also noted an “unusually elevated degree of uncertainty” about the monetary policy path moving forward.
“The Canadian dollar is selling off as the global Santa (Claus) rally unravels,” said Karl Schamotta, chief market strategist at Corpay.
“Odds on an imminent loosening in Federal Reserve policy are fading as the economy displays continued resilience, and sentiment is generally shifting away from the euphoric conditions that characterized trading in late December”.
As investors sold off risk assets and US Treasury bond yields remained near multi-week peaks, the Canadian dollar gained little support from crude prices, which settled 3% higher on the prospect of tighter supply following the shutdown of a Libyan oilfield.
Meanwhile, the safe-haven US dollar rallied against a basket of major currencies.
On a technical level for the USD/CAD pair, analysts at FXStreet note, “The pair is set for a fresh challenge of the 1.3400 level, provided near-term action continues to catch support from the bullish crossover of the 50-hour and 200-hour SMAs near 1.3275.”
“Daily candlesticks have the USD/CAD extending a bullish correction into a fifth consecutive trading day, but the pair remains firmly below the 200-day SMA near 1.3500.”