News and Updates

As we discussed in our previous post, the market perceived the Fed’s recent comments as less hawkish, implying a reduced likelihood of further tightening. This interpretation suggests that the Fed might be unofficially shifting towards a more dovish stance, favoring the maintenance of current rates. This perception has rejuvenated risk assets, including global equity markets and the Canadian dollar. In essence, stable interest rates imply that long-term bond yields will decrease, making riskier assets a more attractive investment opportunity.

Over the past few weeks, the Canadian dollar has lost significant value when compared to the US dollar. Below are the primary reasons for this decline:

The Canadian dollar has been treading water against the US dollar after descending to a 2 ½ year low. Action in the USD/CAD pairing has been muted both overnight and into the morning, with investors on the edge of their seats awaiting the Fed’s rate decision. While there’s widespread agreement among Fed enthusiasts that a pause is on the cards, intrigue lies in the post-announcement statement and press conference. All ears will be tuned in to see if Fed Chair Powell gives the ‘rate hikes are not off the table’ declaration a bit more oomph than usual.

After staging a brief recovery against the USD on Monday, the Canadian dollar is once again losing traction against the US dollar on Tuesday morning. Also of note, the Canadian government’s 10-year bond yields have declined by 3.6 basis points, settling at 3.997%. In line with U.S. government benchmark debt which dipped to 4.8498%.