USD/CAD’s recent rebound is showing signs of running out of steam ahead of the 1.3315 (March/June low) as the Bank of Canada (BoC) remains in familiar territory in the September meeting and pledges to carry out its “large-scale asset purchases of at least $5 billion per week.”
USD/CAD rapidly eased back from 1.3259(fresh monthly high) after upbeat comments from the central bank over economic activity in Q3. The BoC said that “the bounce-back in activity in the third quarter looks to be faster than anticipated in July,” adding that “core funding markets are functioning well, and this has led to a decline in the use of the Bank’s short-term liquidity programs.”
Even so, the BoC remains accommodative saying that the “QE program will continue until the recovery is well underway and will be calibrated to provide the monetary policy stimulus needed to support the recovery and achieve the inflation objective.”
Governor Tiff Macklem’s remarks indicate that the BoC will likely keep on the current path for monetary policy as “both the global and Canadian economies are evolving broadly in line with the scenario in the July Monetary Policy Report (MPR),” . The BoC is expected to continue with current policy tools across the rest of 2020 as the central bank forecasts a “strong reopening phase to be followed by a protracted and uneven recuperation phase.”
USD/CAD could remain pressurised ahead of the Federal Reserve monetary policy announcement on September 16, particularly as the BoC remains in familiar territory, and it seems as though the crowding behaviour in the US Dollar will continue over the coming days as retail traders have been net-long USD/CAD since mid-May.