Markets were generally lower on Thursday as investors grappled with understanding the implications of yesterday’s inflation numbers, which came in slightly lower than expected at 4.9% instead of 5%. The ongoing crisis in the US regional banking sector also weighed heavily on the markets, with another US regional bank facing pressure. PacWest’s shares plunged over 20% today after reporting larger than expected deposit outflows. These factors caused nervousness among investors, leading them to seek safe haven currencies like the US dollar. Consequently, the US dollar traded higher against most currencies, including the Canadian dollar. The Canadian dollar dropped by ¾ of a penny this morning and has now lost over a full penny since Monday’s near one-month high.
The value of the Canadian dollar relative to the US dollar is currently heavily influenced by global market sentiment, strengthening in response to positive news and weakening when negative news arises. However, the overall trend indicates a stronger Canadian dollar compared to the US dollar in the medium to long term. We view volatility or flight to safety, such as the current situation, as an opportunity for US dollar sellers (converting USD to Canadian). We see rates above the 1.3450 (USD/CAD) range as good value for US dollar sellers, particularly for their short-term needs.
