2023-11-21 20:07:31
The Canadian dollar strengthened against its U.S. counterpart on Tuesday, but the move was limited as domestic data showed a slowdown in inflation and investors took into account the minutes of the latest meeting of the Federal Reserve.
The loonie was trading 0.2% higher at 1.37 per greenback, or 72.99 US cents, after trading in a range of 1.3682 to 1.3731.
Canada’s annual inflation rate fell more than expected to 3.1% in October and core inflation measures fell slightly to their lowest levels in about two years.
“This is another point confirming our view that the Bank of Canada, after leading the Fed during the stimulus cycle, will again lead the game in the 2024 easing cycle, with a reduction likely as early as April,” said Simon Harvey, head of foreign exchange analysis for Monex Europe and Monex Canada.
“Markets have slowly aligned with this view over the past few weeks, allowing the Canadian dollar to lag the G10 rally amid a weaker (U.S.) dollar.”
Money markets have almost entirely priced in a rate cut from the Bank of Canada by April and are forecasting three cuts in total next year.
Speculators increased their bearish bets on the Canadian dollar to the highest since June 2017, data from the U.S. Commodity Futures Trading Commission showed Friday.
The U.S. dollar has recouped some recent declines against a basket of major currencies as Fed officials agreed at their Oct. 31-Nov. 1 meeting that they may take a cautious approach to raising rates in the future.
Canadian bond yields were mixed ahead of the release of a mid-year budget update that will show worsening deficits. The update is expected after 4 p.m. EST (2100 GMT).
The 10-year yield rose 2.4 basis points to 3.677%, after hitting its lowest level since September 5 at 3.606%. (Reporting by Fergal Smith, editing by Alistair Bell)
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