The Canadian dollar continued to edge higher overnight and into today, hitting a two-week high against the US dollar. The Canadian dollar gained momentum after stronger-than-expected employment data and stabilizing oil prices, which had fallen by more than 15% over the last three weeks.
The bigger picture here is that the US dollar strength is seen to have peaked as a result of the FED rate hike campaign coming to an end, and the interest rate differential pendulum has now swung back in favor of the Canadian dollar. According to a BMO report, markets are betting that the FED will cut rates multiple times, potentially three 25bps cuts, while the Bank of Canada is only seen as cutting rates once by the end of this year.
If, and these are big “ifs,” oil prices have bottomed out, and the worst of the US regional banking sector woes are behind us, the Canadian dollar may be positioned to strengthen significantly. US dollar sellers that have a limited time horizon should consider converting some of their holdings at 1.3450 (USD/CAD or 0.74349) or higher.
The Canadian Dollar is currently trading at 1.3405 against the US dollar.