The Canadian dollar starts the week at around the same level where it ended last week. On the one hand, market sentiment is slightly negative as investors worry about the prospect of inflation and the rise in Covid cases in some parts of the world — developments which would generally be associated with a stronger US dollar. Oil is also down modestly down from last week which should also be pressuring the Loonie. Finally, Bank of Canada Governor Tiff Macklem’s speech late last week is still weighing on the Canadian dollar. In that speech, he indicated that the Bank will not be in any rush to increase interest rates even if the economy makes up pandemic losses which was perceived as a modest pullback on the Bank’s perceived relatively hawkish posture. On the other hand, treasuries in the US have come down since the inflation scare of last week and Federal Reserve members have gone out of their way to assuage the fear of tightening monetary policy in response to inflation — developments which have been weakening the US dollar. We will get more on that front when the Fed publishes minutes from its April meeting on Wednesday, which will provide further insight into its views on whether the observed rise in prices is here to stay or “transitory”. Until then, there is not much on the horizon that could materially move the USD to CAD exchange rate.
