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.
On Wednesday, the Federal Reserve Bank raised US interest rates to a target range of between 5 – 5.25%. This was the 10th consecutive meeting in which the Fed announced an increase in interest rates, and all indications are that it will be the last one. While the Fed chairman confirmed that there is no clear level at which interest rates are restrictive enough, by removing wording suggesting that more interest rate hikes are necessary from their accompanying statement, the Fed is signaling that it is done increasing rates.
This week, there has been no shortage of negative economic news and renewed worries about the stability of the US regional banking sector, primarily due to the First Republic Bank, which looks like it will be taken over by regulators. In the good old days of a predictable FX market, this would have led to a safe-haven rally for the US dollar, causing the Canadian dollar to drop in value.
The Canadian dollar to US dollar exchange rate remained relatively stable overnight and into this morning. The USD/CAD pair has been hovering at one-month lows (CAD highs) and moving sideways throughout much of this week, with no sustained breaks above 1.3645. Generally, FX markets have been somewhat directionless due to mixed economic news.
