Investing.com – The Canadian dollar strengthened against its U.S. counterpart today, helped by broader risk sentiment, as markets continued to digest yesterday’s more hawkish-than-expected interest rate hold
Meanwhile, the dollar continued to slide following a repeat of this year’s upcoming rate cuts as he continued his Senate floor speech today.
Analysts at Commerzbank (ETR:) note that the Bank of Canada’s more hawkish tone compared to Powell’s comments indicates that the Bank of Canada is likely to move in lockstep with the Fed or later, implying further potential for the Canadian dollar to rise in the coming months.
Commerzbank analysts note: “Some market participants expected a softer tone of the statement. The fact that the Bank of Canada did not meet its targets confirms our view that the Bank of Canada is unlikely to cut rates until the Fed decides.”
“We therefore continue to see potential for the Canadian dollar to rise in the coming months.”
Following yesterday’s Bank of Canada rate decision, markets are now expecting a rate cut in July rather than June as expected before the Canadian central bank’s interest rate announcement.
Meanwhile, Jerome Powell’s testimony ratcheted up the stakes.
Further momentum for the pair will come from tomorrow and the US for February, which markets will be watching for further information on interest rate movements from Canadian and US central banks.
Regarding the technical level of the pair, FXStreet analysts note that “Thursday’s decline takes the pair back to the 200-day simple moving average (SMA) at 1.3477, with the nearest technical floor calculated at the last significant swing low towards 1.3350. “