The greenback was trading at 1.3156 against the Canadian dollar, as of 2:00 p.m. London time.
The US dollar shot decisively higher against the Canadian dollar in yesterday’s session, despite a rate cut by the Fed and the Bank of Canada holding rates steady at their monetary policy meetings.
However, the greenback lost ground against most major currencies after Fed’s Powell suggested that yesterday’s rate cut of 25 basis points marked an end to the mid-term policy adjustment, but that rate hikes are also off the table for the foreseeable future.
The Fed will likely hold steady for now, track the impact of their policy changes, and act as appropriate to support economic growth and inflation targets.
As expected, the Bank of Canada held rates unchanged at the current level of 1.75% as domestic demand remained robust and inflation was on target.
Nevertheless, the BoC noted that growth in Canada is expected to slow down in the second half of the year and that lower commodity prices have fallen amid concerns over global demand. Today’s GDP report, which came in at 0.1% and lower than the 0.2% expected, showed that economic activity in Canada was already losing steam in August.
The US dollar is mostly unchanged against the Canadian dollar in today’s trade after an initial push higher, possibly as the result of changes in investor positioning after the strong two-week downturn in the pair.
Yesterday’s high of 1.3208 acts as a short-term resistance level for the pair and aligns with the 50% Fib retracement of loonie’s October rally.
To the downside, we don’t see any meaningful technical support before the 1.3100 level.