USD/CAD: Canadian Dollar Holds Post Fed Gains, BoC’s Poloz Up Next

The US dollar dipped to a 5-day low versus the Canadian dollar. The US dollar Canadian dollar exchange rate hit a nadir of 1.3160, before closing the session down 0.4% on the day at 1.3172. This was the third consecutive losing session for the pair. The dollar is extending those losses versus the Canadian dollar in early trade on Thursday.

The Federal Reserve sent the US dollar sharply lower across the board on Wednesday. The Fed kept monetary policy unchanged as expected. However, the central bank’s concerns over inflation and the health of the global economy weighed on demand for the greenback. Federal Reserve Chair Jeremy Powell said that monetary policy was appropriate at its current level. The central bank would need to see a significant and persistent increase in inflation to consider hiking rate. The more dovish than expected comments and the fact that the dot plat, which shows the future path of inflation, indicated no changes to policy across next year, weighed on the dollar.

Some analysts consider that the dollar overacted to the announcement given that there was no new information.

Trade headlines will remain in focus today as investors continue attempting to gauge whether the US will apply the tariff hike on 15^th December.

Will Stephen Poloz Drag Loonie Lower?

There was no high impacting Canadian data to drive the Canadian dollar in the previous session. The Loonie was unable to capitalise further on post Fed dollar weakness given that the price of oil also dropped sharply following the Federal Reserve’s assessment f the US economy and the risks it faces. West Texas Intermediate closed Wednesday’s session 0.5% lower., which will have weighed slightly on the commodity sensitive Canadian dollar.

Gains in the Canadian dollar could come under pressure as investors look ahead to a speech by the Bank of Canada’s President Stephen Poloz. There is potential for Stephen Poloz to react dovishly to the dismal Canadian jobs data. Just last week the BoC left its monetary policy on hold at 1.75% as it pointed to a resilient economy and early signs the global economy was stabilising. This will be his first speech since he announced that he would be stepping down when his seven-year term ends in June.

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