There seems to be no letup in the steady stream of positive economic news rolling in this week. Higher Japanese and Australian retail sales, better-than-expected US weekly unemployment numbers, and a significant upward revision in USD Q1 GDP from 1.4% to 2% are all fanning the flames of the ‘higher for longer’ school of thought when it comes to interest rates and central banks’ strategy to fight inflation.
The Canadian dollar has lost 1.5 cents against the US Dollar in the past two days, and the reason is that strong economic data, mentioned above, is increasing expectations that the Fed will need to hike rates in the second half of the year more than previously thought. Markets are currently pricing in an 85% chance of the Fed raising rates again next month, up from a 70% chance priced in at the end of last week.
If you are a US dollar seller, we think anything over 1.317 (USD/CAD) is a reasonable price for your immediate trading needs. If you are buying US dollars with the Canadian dollar, you have missed the peak, but not all is lost as we expect the Canadian dollar to continue gaining over the long term.
The Canadian dollar is currently trading at 1.3247 against the US dollar.
