USD/CAD: US Senate’s HK Bill Hits Sentiment, US Dollar Advances

The Canadian dollar declined 0.4% versus the US dollar on Thursday, as the Lonnie touched its weakest level versus the greenback since October 11 at 1.3272. The US dollar is advancing in early trade on Wednesday

The US dollar had a quiet day on Tuesday as investors continued to try to make sense of the mixed trade messages from the US and China. There is more scepticism now than just a few days ago over whether a deal can be achieved. News overnight that the US Senate passed a bill supporting pro-Democracy protests in Hong Kong will aggravate tensions between China and the US further. The safe haven dollar is advancing on weaker risk sentiment.

Today US dollar investors are looking ahead to the release of the minutes from the Federal Reserve monetary policy meeting, the FOMC on 30^th October. Investors are keen to see the deliberations before the Fed decided to cut interest rates for a third time this year and to press pause on the cutting cycle. There were two dissenters at the meeting so investors will also be keen to understand their positions. However, the fact that the minutes are released after Jerome Powell’s testimony before Congress last week, means that they are now slightly outdated.

Canadian Dollar Stumbles On Dovish BoC & 3% Drop In Oil

The Canadian dollar weakened to a near six week low versus its US counterpart following a speech by a senior Bank of Canada official, who indicated that he central bank is edging closer towards an interest rate cut.

BoC Senior Deputy Governor Carolyn Wilkins made some open-ended remarks which investors interpreted as the central bank adopting a more dovish tome. The chances of a rate cut by the central bank increased from below 60% before Carolyn Wilkins speech to 64% straight after.

Carolyn Wilkins speech comes after the central bank adopted a more cautious tone in October by slashing growth forecasts whilst expressing concern over global trade uncertainty.

Adding to headwinds for the Canadian dollar was a sharp drop in the price of oil, one of Canada’s principal exports. West Texas Intermediate settled 3.2% lower at an 11-day nadir, on trade concerns and rising stockpiles.

Canada’s inflation report is due later today. Analysts are expecting inflation to have jumped 0.3% month on month in October. Up from a -0.4% decline in September. A strong reading could help lift the Canadian dollar.

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