The USD/CAD pair has appreciated to approximately 1.3885 during the early European trading session on Thursday. This upward movement is supported by hawkish commentary from Federal Reserve Chair Powell and robust Retail Sales figures, bolstering the US Dollar. Market liquidity is anticipated to be reduced ahead of the Good Friday holiday.
Chairman Powell indicated on Wednesday that increasing tariffs could contribute to inflationary pressures while simultaneously hindering economic growth, thereby complicating monetary policy decisions. He stated the Federal Reserve is positioned to await further clarity before contemplating adjustments to the current policy stance. These remarks have diminished expectations of a June rate cut, subsequently strengthening the USD against the CAD.
The Bank of Canada (BoC) maintained its policy rate at 2.75% at its April meeting, marking the first instance of holding steady since the commencement of its easing cycle in June. The BoC cited a weakening economic climate, characterized by decelerating consumer activity and heightened economic uncertainty. Market forecasts, as indicated by a Bloomberg survey, suggest a 50% probability of the BoC resuming its easing policy at the June meeting, with expectations of two additional rate reductions by year-end.
