USD/CAD soars to a three-month high, above 1.3500 post-FOMC minutes release
- Fed officials unanimously aim for the 2% inflation target, but divisions arise on the next steps.
- The US Dollar Index (DXY) reflects the greenback’s strength, rising 0.29% to 103.497, supported by rising US Treasury bond yields.
- USD/CAD’s bullish momentum is evident as it trades above the 200-day Moving Average, with key levels around the 1.3545 high and the R1 pivot at 1.3520.
USD/CAD climbs above 1.3500 and refreshes a three-month high at 1.3539 after the Federal Open Market Committee (FOMC) revealed its July monetary policy minutes, offering split views amongst Fed board members while committing to its goal of inflation of 2%. The USD/CAD is trading at around 1.3520/40 amidst a volatile session, with more than 0.20% gains.
Federal Reserve’s divided stance on rate hikes propels the pair above the 1.3500 mark, with the greenback gaining ground
The minutes highlighted a unanimous commitment among all Federal Reserve officials to their goal of reducing inflation to the targeted 2%. Concurrently, most participants evaluated that the potential for elevated inflation risks would necessitate additional tightening measures.
However, a division within the Fed board became evident regarding monetary policy, as a “few” members advocated for maintaining the existing interest rates. Among them, Atlanta’s Fed President Raphael Bostic consistently voiced his stance in favor of unchanged rates. Recently, Philadelphia’s Fed President Patrick Harker echoed some of Bostic’s comments as it turned more neutral.
Despite the economy’s demonstrated resilience, lingering concerns remain about potential downward impacts on economic activity and the potential risks associated with a rise in the unemployment rate.
Federal Reserve officials agreed that forthcoming rate decisions would be based on a comprehensive assessment of incoming data while adopting a cautious approach in the upcoming months.
Amid these developments, the greenback is recovering some ground, as shown by the US Dollar Index (DXY) gaining 0.29%, at 103.497, underpinned by higher US Treasury bond yields.
USD/CAD Reaction
Following the data release, the USD/CAD edged towards its daily high of 1.3545, followed by a dip towards the R1 pivot at 1.3520, before edging towards the current exchange rate. The USD/CAD is trading back above the 200-day Moving Average (DMA), which sits at 1.3448, portraying a bullish bias.