C$ posts biggest weekly decline since January as curve inverts
By Fergal Smith
TORONTO (Reuters) – The Canadian greenback fell to a two-week low in opposition to its broadly stronger U.S. counterpart on Friday as traders weighed financial information that would assist extra aggressive rate of interest hikes by the Financial institution of Canada and the Federal Reserve.
The loonie was buying and selling 0.5% decrease at 1.2760 to the dollar, or 78.37 U.S. cents, after touching its weakest since Could 26 at 1.2812. For the week, it was down 1.3%, its largest weekly decline since January.
“The CAD is ending the week on the defensive,” strategists at Scotiabank, together with Shaun Osborne, mentioned in a word. “The slide displays a broader rebound within the USD amid indicators of persistent inflationary pressures.”
The U.S. greenback jumped in opposition to a basket of main currencies, fairness markets globally tumbled and the worth of oil, one in every of Canada’s main exports, settled 0.7% decrease as U.S. client costs accelerated in Could, cementing bets for a second consecutive half-percentage-point rate of interest hike by the Fed at a coverage resolution subsequent Wednesday.
Canada’s central financial institution has additionally been mountain climbing in half-percentage-point increments.
Cash markets see a few 60% likelihood that it might announce a fair bigger transfer on the July 13 coverage announcement after information confirmed the Canadian financial system including 40,000 jobs in Could, extra jobs than anticipated, and the unemployment price hitting a document low at 5.1%.
The decline for the loonie got here as Canada’s 2-year yield climbed above the 30-year yield for the primary time since February 2020. An inverted curve might replicate investor expectations for slower financial development but in addition the potential for diminished provide of Canadian long-term debt.
On Thursday, the Authorities of Canada canceled an ultra-long bond concern deliberate for subsequent week, saying the choice displays the nation’s declining borrowing wants.
Canada’s 10-year yield on Friday rose 11.2 foundation factors to three.345%, monitoring the transfer in U.S. Treasuries.
(Reporting by Fergal Smith; enhancing by Jonathan Oatis and Alex Richardson)
