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Canadian Dollar extends gains on hawkish BoC message, softer US Dollar

  • USD/CAD falls for a second consecutive day as the Greenback weakens across the board.
  • Dovish comments from Fed Governor Waller contrast with the BoC’s stronger inflation warning.
  • US and Canadian jobs data on Friday could shape expectations for both central banks.

USD/CAD extends its decline for the second consecutive day on Thursday as broad US Dollar (USD) weakness and the Bank of Canada’s (BoC) hawkish message at its September policy meeting support the Canadian Dollar (CAD). Rising Oil prices provide an additional tailwind to the commodity-linked Loonie. At the time of writing, the pair trades around 1.3785, its lowest level in over a week.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.00, near a one-week low, after reaching 99.86 on Wednesday, its highest level since August 14.

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 (Fed) Governor Christopher Waller add to the weakness, while US Treasury yields retreat from recent highs across the curve.

Waller said he is “finally seeing some signs of disinflation in recent data” and that the September rate decision depends on the August inflation figures. He added that he would support keeping interest rates unchanged if the upcoming data confirm recent progress. According to the CME FedWatch Tool, the probability of a rate hike at the September 15-16 meeting has fallen to around 48% from 63% a day earlier.

In Canada, the BoC’s hawkish hold on Wednesday raised expectations of a rate hike before the end of the year. Analysts at Brown Brothers Harriman note that, “as was widely expected, the BoC kept the policy rate at 2.25% for a seventh consecutive meeting but warned that ‘the upside risks to inflation have increased.’”

They point out that this shift in tone prompted a swift repricing, as “markets brought 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.” However, BBH cautions that “that’s too aggressive in our view given core inflation is near the BoC’s 2% target and indicators point to continued excess supply in the economy.”

On the data front, US Initial Jobless Claims rose to 206K, slightly above expectations of 205K, while the ISM Services Purchasing Managers' Index (PMI) increased to 55.4 in August from 54.1 in July. Attention now turns to Friday’s labour-market reports on both sides of the border. The US economy is expected to add 58K jobs in August, while Canadian employment is forecast to rise by 15K.

Canadian Dollar Price Today

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the US Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.30%-0.37%-1.91%-0.41%-0.35%-0.50%-0.63%
EUR0.30%-0.06%-1.66%-0.16%-0.03%-0.26%-0.32%
GBP0.37%0.06%-1.60%-0.09%0.02%-0.18%-0.27%
JPY1.91%1.66%1.60%1.55%1.63%1.42%1.34%
CAD0.41%0.16%0.09%-1.55%0.06%-0.13%-0.21%
AUD0.35%0.03%-0.02%-1.63%-0.06%-0.19%-0.26%
NZD0.50%0.26%0.18%-1.42%0.13%0.19%-0.05%
CHF0.63%0.32%0.27%-1.34%0.21%0.26%0.05%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).

Author

Vishal Chaturvedi

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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