USD/CAD hits one-month highs above 1.3670 and then retreats
- Bank of Canada to announce monetary policy on Wednesday.
- The Loonie is the worst G10 performer on Tuesday.
- USD/CAD up for the fourth day in a row, heads for highest close in a month.
The USD/CAD rose further during the American session amid risk aversion and a decline in crude oil prices, ahead of the Bank of Canada decision. The pair climbed to 1.3670, hitting the highest level since November 4 and then pulled back toward 1.3620.
A weak Loonie boosts USD/CAD
As of writing, USD/CAD is hovering around 1.3645, about to post the fourth consecutive gain and the highest daily close in a month. The Canadian dollar is on Tuesday the worst performer among the G10 space.
The decline in crude oil prices (WTI down 1.80%, at fresh weekly lows) and in equity price weighs on the Canadian Dollar. The Dow Jones is falling by 0.53% and the Nasdaq drops by 1.58%. Crude and equity indexes are adding to yesterday’s losses.
On Wednesday, the Bank of Canada will announce its decision on monetary policy. A 50 basis points rate hike to 4.25% is expected. Some analysts see a smaller rate hike. Volatility around the decision is expected to increase significantly on CAD’s crosses.
“The BOC is unlikely to offer much to move the needle for CAD. CAD underperformance on crosses has occurred quickly and looks tactically stretched. A case for a reversal can be made, but we will look to fade that strategically given idiosyncratic drags”, said analysts at TD Securities.