Overnight, the Canadian Dollar weakened by about ¼ of a penny against the US dollar. However, this morning, both the CAD and USD are underperforming against major global currencies. The USD/CAD pairing has mostly experienced range-bound trading over the last two days, with the exchange rate bouncing between defined levels. All the action occurred earlier this week following the release of higher-than-expected April inflation numbers in Canada. Initially, this news provided a temporary boost to the Canadian dollar, leading to a decline in USD/CAD from a high of 1.3567 to around 1.3400 on Wednesday. However, much of this decline was quickly reversed.

The stalemate between the Canadian dollar and the US dollar can be attributed to the similarities in the projected paths of both the Federal Reserve (Fed) and the Bank of Canada (BoC). Market expectations suggest that both central banks are likely to implement one additional 25bp rate hike in 2023 before pausing for the first half of 2024, potentially followed by rate cuts in the latter half of 2024.

The Canadian Dollar is currently trading at 1.3515 against the US dollar.