Investing.com – The edged marginally higher against its U.S. counterpart today, but still remained down for the week following a decision from the earlier this week.
The Canadian central bank kept rates steady at 5%, as had been widely expected, and signaled that there will be no further interest rate increases during this policy tightening cycle.
The BoC also suggested that the downturn in the Canadian economy may deepen, putting further pressure on the loonie.
“We can’t look past what we heard from the Bank of Canada this week,” noted Bipan Rai, global head of FX strategy at CIBC (TSX:) Capital Markets.
The signal being sent now that rates are restrictive enough should at the margin introduce a little bit more two-way risk to the way the Canadian trades over the next couple of months, not least as we look forward to the Federal Reserve next week.”
The Federal Reserve is set to make its own interest rate decision next week on Wednesday.
Today’s US Core came in at 2.9% year over year, a notch under expectations. However, continued and robust came in higher than expectations, putting a damper on rate cut hopes.
Markets expectations for a cut in March declined marginally following the PCE release, falling under 50%.
Next week, CAD traders will also be watching for the Canadian GDP reading, which is expected to tick higher 0.1% month over month from November.
Looking ahead for the pair, analysts at Scotiabank (TSX:) note that “The broader technical tide may be turning against the USD”, recommending that traders look “to fade USD rallies in the week ahead”
On a technical level for the pair, Scotia analysts write, “The 1.3540 area is start to look solid. Near-term focus is likely to remain on the low 1.34 zone—recent lows, 1.3540 double top trigger and the 40-day MA (1.3412).”