USD/CAD reversal from 1.4170 accelerates below 1.4000
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- USD/CAD reversal from 1.4170 extends to week-lows at 1.3960 area
- The Canadian dollar appreciates as the Fed. Government announces an extra payment for essential workers
- The USD weakens as Fed funds futures contracts anticipate negative rates in 2021
The USD/CAD reversal from 1.4170 high on Wednesday has gained traction after breaking below the 1.4000 level to explore fresh intra-week lows at 1.3960 so far. The Canadian is building up momentum on the back of the Federal Government's plan to boost wages to essential workers during the COVID-19 crisis.
CAD jumps as the Fed Government pledges to top up workers’ wages
Canadian Prime Minister, Justin Trudeau has just announced an agreement between the Federal Government and the provinces to release a C$4 billion budget to increase the salaries of front-line coronavirus workers. The market has reacted buying the Canadian dollar, which has boosted the USD/CAD more than 1% lower on the day.
Furthermore, the Fed funds futures contract crawled just above the 100 level earlier today, suggesting negative interest rates for January 2021. Given the current inflation expectations, the Fed funds rate anticipates that the Federal Reserve will be forced to cut rates below zero next year. The US dollar has weakened across the board, as a result, increasing bearish traction on the USD/CAD.
USD/CAD aimed to 1.3600 by year-end – NBC
The FX analysts’ team at the National Bank of Canada, see the USD depreciating further in the mid-term, “The Fed’s open-ended QE program implies a bias towards further Canadian dollar appreciation. We have accordingly adjusted our near term USDCAD forecasts, expecting the cross to reach 1.36 by year-end.”
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