The Canadian dollar slid against the US dollar, with the decline accelerating mostly due to US Federal Reserve Chair Powell’s comments earlier in the week that the Fed might need to hike rates at a faster pace, resulting in a higher terminal rate. Although there seems to be some uncertainty on whether the next increase should be 25 or 50 basis points, with the latest market analysis leaning towards 25 basis points.
In contrast, the Bank of Canada left its key overnight interest rate on hold at 4.50%, as expected, becoming the first major central bank to halt its monetary tightening campaign.
Market analysts forecast a significant discrepancy in interest rates between Canada and the US due to the Canadian economy’s higher sensitivity to rising interest rates. This may lead to a historic gap between the two countries’ interest rates, causing a decline in the value of the Canadian dollar versus the US dollar.
The Canadian dollar (CAD) is currently trading at 1.3802 (0.7245) versus the US dollar.
