Canadian dollar holds near four-week high as investors stick to rate hike bets
TLT•The Canadian dollar held near a four-week high as investors priced in an roughly 80% chance of a Bank of Canada rate hike on October 28. The loonie was little changed at C$1.4050 per US dollar.
1. Rate hike bets persist
The Canadian dollar steadied near a four-week high on Wednesday as investors maintained bets that the Bank of Canada would raise interest rates next week. The loonie was barely changed at 1.4050 per US dollar, after reaching 1.4030 on Tuesday, its strongest intraday level since September 22.
2. Economic factors in focus
Investors see about an 80% chance the central bank will raise its benchmark rate by 25 basis points to 2.50% on October 28. Governor Tiff Macklem said the bank expects to raise its quarterly inflation forecast significantly this month because crude oil and petroleum product prices remain high. Uncertainty over US-Canada trade relations was described as a headwind for Canadian growth and the currency.
3. Other market signals
Canada and Ontario announced a C$9 billion support package for the steel and auto sectors and critical mineral supply chains. Analysts expect August retail sales, due Friday, to rebound 1.3% after falling 0.7% in July. US crude futures fell 0.9% to $96.98 a barrel, while Canada’s 10-year government bond yield eased 2.6 basis points to 3.867%.
