USDCAD 2 hour
USDCAD 2 hour

The first leg of USD/CAD strength today came after the strong ISM data, which boosted the US dollar across the board. In USD/CAD now, we're getting a second leg as oil prices give back gains.

WTI crude oil traded as high as $82.72 today as the G7 price cap on Russian oil kicks in and we digest the OPEC+ decision. However the gains didn't last as the risk mood sours and WTI is now down to $79.97, which is nearly flat on the day. One reason may be Libya signaling more production.

The drop in oil prices along with an 8% decline in natural gas on better weather forecasts is hurting the loonie and has boosted USD/CAD to a two-day high of 1.3538.

Notably, this is a big week for Canada with the Bank of Canada decision on Wednesday. The market is 69% priced for 25 bps with the remainder at 75 bps. Friday's Canadian jobs report was strong once again but the BOC has signaled that it wants to slow down.

CIBC is warning that the decision and speech the day afterwards are a minefield for traders on what could ultimately be a trivial difference between 50 bps now and a pause or back-to-back 25 bps hikes.

"For traders putting on short-term positions, however, the difference would be material, a reason why we wouldn’t put big bets on which cola Macklem reaches for. Of late, we’ve seen some significant market reactions to what sounded like trivial differences in the words chosen by central bankers. Just this past week, the market found some reason to react to a speech by Powell that was really a retread of things he’d already said. With BoC Deputy Governor Kozicki scheduled to speak on Thursday we could see the market tilt one way on
the announcement, only to be jarred back the other way if her remarks attempt to correct its interpretation."