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USD/CAD - Canadian Dollar Recouping Losses

The Canadian dollar continues to recoup losses incurred following last week’s Federal Open Market Committee meeting. The FOMC’s Summary of Projections (SEP) predicted two rate hikes in 2023, compared to zero rate hikes in the March SEP.

The news sent stocks and commodity prices tumbling and the U.S. dollar soaring, despite Fed Chair Jerome Powell’s saying the forecasts should be taken with a "big grain of salt." Traders ignored Powell and paid attention to FOMC non-voting committee members, Dallas Fed President Robert Kaplan, and St Louis Fed President James Bullard. They insisted that the rise in inflation necessitated an earlier start to tapering quantitative easing purchases and suggested rate hikes would be needed sooner rather than later.

Yesterday, Powell reiterated that inflation was transitory and that the current unemployment rate of 5.8% understated the shortfall in employment. Cleveland Fed President Loretta Mester agrees with Powell and said the FOMC is not at the point where it needs to dial back accommodative monetary policy.

The news was music to the ears of Wall Street traders. The major equity indexes rallied, and the NASDAQ posted a record close. The U.S. dollar retreated, commodity prices rose, and 10-year Treasury yields were steady.

Asia equity indexes closed on a mixed note. The major Chinese indexes were a tad higher, Japan’s Nikkei 225 index closed flat, and Australia’s ASX 200 fell 0.60%. The major European bourses are in the red, and Wall Street futures are bouncing on either side of unchanged.

EUR/USD recovered from its $1.1913 low in Asia and rallied to $1.1949 in early New York trading. Prices got a boost from better than expected Eurozone PMI data, and positive comments from European Central Bank policymakers. However, the technical picture is negative while prices are below $1.2000.

GBP/USD traded in a $1.3925-$1.3986, supported by concerns thar Purchasing Managers Index data was softer than in May.

AUD/USD and NZD/USD rallied on the back of the improved risk sentiment tone, and higher commodity prices.

USD/CAD traded with a negative bias, falling from $1.2327 to $1.2284, coinciding with another surge in oil prices. West Texas Intermediate climbed to $73.54/barrel after the American Petroleum Institute reported US crude inventories fell 7.199 million barrels.

Canada April Retail Sales are ahead. They are forecast to fall 5.0% but the results should be ignored as they are due to the third wave coronavirus outbreak.

Rahim Madhavji is the President of, a Canadian currency exchange that provides better rates than the banks to Canadians