Loonie Soars as BoC Hawkishness Combines with Weaker Greenback
The Canadian Dollar continues its upward trend against the US Dollar, reaching its lowest level in over a week. The USD/CAD pair currently trades at around 1.3785, with the Loonie benefiting from the Bank of Canada's (BoC) hawkish message and rising oil prices.
At the BoC's September policy meeting, policymakers kept the policy rate at 2.25% for a seventh consecutive meeting but warned that 'the upside risks to inflation have increased.' This shift in tone prompted markets to bring forward expectations for a first 25bps hike from January to December and firmed up odds of 75 to 100bps of tightening over the next twelve months, according to analysts at Brown Brothers Harriman.
The US Dollar (USD) weakness is also contributing to the Canadian Dollar's gains. The Greenback comes under broad selling pressure as a sharp rally in the Japanese Yen (JPY) spills over into the wider currency market. Dovish comments from Federal Reserve Governor Christopher Waller, who said he 'is finally seeing some signs of disinflation in recent data' and that the September rate decision depends on the August inflation figures, add to the weakness.
The upcoming jobs data on Friday may shape expectations for both central banks. The US economy is expected to add 58K jobs in August, while Canadian employment is forecast to rise by 15K.