The US dollar has bounced back from the dip it experienced after the Federal Reserve announcement yesterday. The Fed emphasized that it is moving cautiously to rein in monetary stimulus. As expected, it plans to cut back asset purchases later this month. However, the US central bank continues to see inflation as transitory and did not indicate a move forward in expected rate hikes. Initially, the US currency declined against broadly, including against the Canadian dollar. However, the greenback has now recovered those losses as the market does not seem to have accepted the Fed’s message on interest rate hikes and continues to price in earlier rate increases than the Fed is projecting. The Canadian dollar is now trading at just below its recent ranges and near its highest level since mid October. USD to CAD at 1.243 (CAD to USD is at 0.804). The US dollar is also seeing some inflows this morning because the Bank of England defied market expectations by keeping interest rates on hold. The pound dropped 1%. Oil prices have been fluctuating as OPEC meets today but the cartel is not expected to increase output beyond previously planned numbers, despite geopolitical pressure from to increase supply. Any surprise output increase would heavily pressure the Canadian dollar.
