The Canadian dollar reached a four-week high against the USD earlier this week, after touching 1.3572. Investors seem to be of the view that the worst-case scenario of a global banking sector meltdown is now less likely, and that the banking crisis has been contained. This has resulted in a more upbeat market outlook, led by a resurgence in technology stocks. All this has helped propel oil prices higher, which, in turn, has allowed the Canadian dollar to stabilize at these new higher levels against the US dollar. The USD/CAD is currently trading at 1.3538 (CAD/USD 0.73866).
Also helping the Canadian dollar was this week’s federal budget announcement. The budget was seen as being generally favorable for the Canadian dollar, by making Canada’s clean energy and electric vehicle manufacturing sectors more competitive.
This new positive market sentiment suggests that the Federal Reserve Bank can now refocus on fighting inflation more aggressively and raise rates by 0.50 points instead of the anticipated 0.25 points at their next meeting.
