The Bank of Canada’s Governing Council voted to raise the overnight rate by 50 basis points to 4.25%. The Bank mentioned that the Governing Council “will consider whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target.” The Governing Council has identified that prior rate hikes’ effects have started to cool demand and stunt the momentum of higher, broad-based price pressures. But this will, of course, depend on data until the next meeting in January.
Market participants’ eyes shift to the Fed’s decision next week. Meanwhile, they will focus on the US data this week and the US CPI next week. From now on, the US inflation data will guide the US dollar against the Canadian dollar. US inflation data kept coming in stronger than expected, and the dollar would be more robust and the Canadian dollar weaker.
Key events ahead:
- Initial jobless claims on Thursday
- US PPI, wholesale inventories, and University of Michigan consumer sentiment on Friday
USDCAD – Day Chart
USDCAD bull’s strength persists and attempts to test the 1.37 level. The bulls remain as the daily chart’s 10, 20, and 50 moving averages remain bullish. Suppose a break of the 1.3700 mark opens the prospects of run-on liquidity toward the upper resistance level, with the first target at 1.3779/1.3866.
