It has been a volatile week for the the USD to CAD exchange rate. The Canadian dollar started the week trading at near 6 year highs as April jobs numbers disappointed on both sides of the border. The Loonie ploughed further into multi-year highs as oil prices jumped in response to a cyber attack which had shut down a major pipeline in the US. On Wednesday, inflation figures in the US came in much hotter than expected which led to a sell-off in stocks on anticipation that the Fed would have to move faster than expected to rein in QE. Then, in a speech yesterday, Bank of Canada Governor Tiff Macklem indicated he will not be in any rush to increase interest rates even if the economy makes up pandemic losses. The statement was perceived as a modest pullback on the Bank’s perceived hawkish posture. Naturally, the Canadian dollar reacted negatively to the statement and lost about 0.5%. Another headwind for the Loonie yesterday was the price of oil which retreated significantly after the resolution of the pipeline shutdown. This morning, the Canadian currency has recovered most of that ground as oil pushes back up and stock and treasury markets have stabilized.
