After softening considerably following the publication of dovish minutes from the most recent Federal Reserve monetary policy meeting, the US Dollar has clawed back some losses on Friday. Better-than-expected import data and trader risk aversion have contributed to the ‘Greenback’ (USD) gains. Meanwhile the Canadian Dollar has firmed up against most of its rivals after labour market data printed positively.
The US Dollar to Canadian Dollar exchange rate is currently trending in the region of 1.1160.
On Thursday the US Dollar tumbled across the board after the publication of the minutes from the most recent Federal Open Market Committee (FOMC) meeting. The minutes revealed policymaker’s anxieties over US Dollar overvaluation and the slow pace of global economic recovery.
‘Some participants expressed concern that the persistent shortfall of economic growth and inflation in the Euro area could lead to a further appreciation of the Dollar and have adverse effects on the US external sector,’ according to the minutes. ‘Several participants added that slower economic growth in China or Japan or unanticipated events in the Middle East or Ukraine might pose a similar risk.’
Better-than-expected Canadian domestic data on Thursday allowed the ‘Loonie’ (CAD) to hold against its most traded currency competitors despite a crumbling US Dollar. The yearly Housing Price Index met with the median market forecast of a jump to 1.5% from 1.4%. The monthly score eclipsed the market consensus of a rise from 0.0% to 0.1%, with the actual result advancing to 0.3%.
The US Dollar to Canadian Dollar exchange rate has fallen to a low today of 1.1163.
On Friday the US Dollar has clawed back some losses amid trader risk aversion strategies. The International Monetary Fund published a report which stated that the prolonged period of low interest rates are encouraging excessive risk taking on global markets. The risks could lead to a fresh financial crisis which has caused traders to pull away from high-yielding currencies, favouring investment in safe-haven assets.
‘Accommodative policies aimed at supporting the recovery and promoting economic risk taking have facilitated greater financial risk taking,’ the IMF said.
The US Import Price Index advanced beyond expectations. On a yearly basis imports were expected to decline by -1.4% but the actual data only contracted by -0.9%.
Friday’s Canadian economic data has printed above expectations aiding a ‘Loonie’ uptrend. Having lost 11,000 jobs in August Net Change in Employment eclipsed the median market forecast of an increase of 20,000 new positions, with the actual data soaring to 74,100. This, in turn, led to a positive declination in the Unemployment Rate, which fell to 6.8%.
Forecast for the US Dollar to Canadian Dollar Exchange Rate
With several Federal Reserve officials due to make speeches later in the day it is likely that the US Dollar will experience volatility. Given that the Fed are anxious regarding US Dollar overvaluation it is doubtful that there will be any hawkish comments.
The Canadian Dollar is likely to continue to appreciate as traders digest the huge increase in jobs.
The US Dollar to Canadian Dollar exchange rate has climbed to a high today of 1.1215.
