The USDCAD moved higher yesterday in a move that was contrary to how the rest of the currencies reacted to the dollar. The dollar was on the backfoot for much of the day yesterday and it continues to be so today as well due to the firing of the secretary of State by Trump and also due to fears of increased trade risks but we are seeing that the dollar has been moving higher in this pair alone.
USDCAD Moves Higher
The reason for the move higher is the fact that the normally hawkish BOC Governor Poloz was not so happy and hawkish yesterday. The weakening of the CAD, the weakening of the oil prices and the possibility of being hit with trade wars and trading tariffs has probably forced the BOC to rethink a bit about the pace of its rate hikes. The BOC had been one of the most hawkish of the central banks over the past 1 year as they proceeded with 3 rate hikes during this period.
But the developments described above has probably forced them to take a pause and wait on the sidelines to not only watch happens in the next few months but also to ensure that the benefit of the rate hikes percolates through the economy. The incoming data from Canada has not been as strong as many would have expected and hence the BOC would like to take a seat back and watch the developments. This view has led the CAD lower and pushed the USDCAD pair higher.
The pair trades comfortably above the 1.29 region as of this writing and it looks all set to test the region around 1.30 yet again. It had failed the previous time but it remains to be seen whether it has the right momentum for a breakout now. On the other hand, the dollar has retail sales data coming through and if there is some weak data, then we could see the pair fall back into range.
This article was originally posted on FX Empire
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