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USD / CAD - Canadian Dollar rebounds sharply

- Fed leaves rate cut outlook unchanged.

- Swiss National Bank catches market off-guard and cuts rates.

- US dollar sinks across the board.

USDCAD: open 1.3485-89, overnight range 1.3456-1.3504, close 1.3493, WTI $81.05, Gold, $2205.60

The Canadian dollar got a much-needed boost after the Fed meeting yesterday. The Federal Open Market Committee left rates unchanged as was widely expected but also left their interest rate projections the same as they were in December.

USDCAD plunged from a pre-Fed meeting high of 1.3606 to an overnight low of 1.3456 and flipped the short-term technicals to bearish in the process. The technicals may be bearish, but the risk that the Bank of Canada cuts its overnight rate by 25 bps as early as June will limit the downside.

Last December, the FOMC Summary of Projections showed that committee members expected to reduce the fed funds rate three times in 2024 for a total reduction of 75 bps. A slew of stronger than expected economic reports, which included strong nonfarm payrolls data and mixed to higher inflation reports, fueled speculation the Fed would not only delay reducing rates but only cut them twice. That view was proved wrong, and long US dollar positions were quickly unwound.

The Bank of Canada Summary of Deliberations was released yesterday. It explained that the decision to leave rates at 5% in January and March was due to an abundance of patience, which is required to allow previous rate hikes to work through the system.

EURUSD rallied post-FOMC meeting and is trading in a 1.0887-1.0943 range. Eurozone PMI (actual 45.7 vs. forecast 47) disappointed, but the focus was on the Swiss National Bank, who surprised markets by cutting its benchmark rate by 25 bps.

GBPUSD is near the bottom of its 1.2762-1.2803 range due to caution ahead of the BoE decision due at 8:00 am EDT. The UK recession looks to be over after PMI data was close to estimates and still in expansion territory.

USDJPY churned in a 150.27-151.46 range due to falling US Treasury yields and the Bank of Japan’s dovish rate hike this week.

AUDUSD traded in a 0.65679-0.6634 band supported by a stronger than expected employment report (actual 116,500 new jobs vs. forecast 40,000).

Today’s US data includes Jobless claims, Philadelphia Fed Manufacturing PMI, and Existing Home Sales