On Wednesday, the Federal Reserve Bank raised US interest rates to a target range of between 5 – 5.25%. This was the 10th consecutive meeting in which the Fed announced an increase in interest rates, and all indications are that it will be the last one. While the Fed chairman confirmed that there is no clear level at which interest rates are restrictive enough, by removing wording suggesting that more interest rate hikes are necessary from their accompanying statement, the Fed is signaling that it is done increasing rates.
This resulted in the US dollar declining broadly against almost all major currencies. The Canadian dollar strengthened mildly against the US dollar, slipping below 1.36 (USD/CAD), but once again was unable to gain any major traction as a result of continued declines in oil prices, down just over 4% yesterday.
According to the Wall Street Journal analysis, in the Fed’s past four rate cycles, the US dollar weakened or remained unchanged for three to four months after the final increase before regaining its strength. As the air is slowly let out of the US dollar, the Canadian dollar will incrementally increase in value against the US dollar.
We expect a stronger Canadian dollar into and through this summer. The Canadian Dollar is currently trading at 1.3579 against the US dollar.
