It was a double whammy for the USD/CAD pair yesterday, as it plunged close to 200 points.
Strong CAD: The concession by the United States on U.S. content for vehicles is very positive news for progress in NAFTA talks, which sent the loonie soaring.
Weak USD: Chairing his first monetary policy committee meeting, new U.S. Federal Reserve Chair Jerome Powell made a good impression, but was not sufficiently aggressive regarding certain market expectations: no key rate increases were added for 2018 and limited anticipations exist for rising inflation given projected growth rates for 2018 and 2019. The EUR/USD pair finished the trading day on top, while the USD/CAD pair was on the bottom.
The surge that we’ve been witnessing since the start of February may not be over, but a great many elements lead us to think that it could be nearing the end. USD sellers should remain cautious and make sure that hedging in place is adequate.
After the announcements on NAFTA, our economists were comforted in their belief that an agreement was close to being found and that the USD/CAD pair could return toward the bottom of the 1.2000-1.3000 range over the coming months.
This morning, volatility is high on stock markets further to President Donald Trump’s announcement regarding tariffs for Chinese goods. There may be USD/CAD rebounds that sellers could seize on.
Olivier Cosialls
Range of the day: 1.2800 – 1.2925