Yesterday was fairly quiet, with range-bound trading for both equities and FX markets, including the Canadian dollar, remaining relatively flat. However, today, stocks have turned lower after several smaller regional US banks, most notably First Republic, reported larger than expected deposit outflows (meaning more money is flowing out of the bank than into the bank), suggesting that stability risks have not entirely gone away. Additionally, market expectations for Google to report another drop in ad revenue and for Microsoft to indicate that their earnings growth likely slowed down last quarter are adding to the pessimistic outlook. Adding to the negative sentiment, US consumer confidence has hit a nine-month low.
As expected, investors sought the safety of US dollars as a hedge against market instability, pushing the USD higher against the Canadian dollar. However, market expectations that the Fed will signal a long pause after raising rates one last time by 25 points next month are preventing the US dollar from breaking through and accelerating to last month’s highs against the Canadian dollar. As a result, the Canadian dollar and US dollar are stuck in a trading range. Nonetheless, we anticipate the Canadian dollar to gradually drift higher over the medium to long term against the US.
The Canadian Dollar is currently trading at 1.3628 against the US dollar.