CAD is Expected to Appreciate in the Following Weeks
In the immediate term, the CAD has a decent chance of extending its recent rally. We believe the stars are aligning in favor of the CAD, causing USD/CAD to return to the 1.24 level (and possibly a fair bit lower in H2). Following its decision to hike 50 basis points, the Bank of Canada issued a hawkish statement, implying that domestic monetary tightening may outrun the Fed in the coming months. Policymakers are making it clear that large rate hikes are required to maintain credibility in the 2 percent inflation objective, and that policy settings may have to rise above 3% to achieve that goal. Policymakers have also opened the door to a faster rate of tightening, reigniting expectations that the Bank could raise rates by 75 basis points.
Interest rate differentials are shifting back in the CAD's favor. Meanwhile, commodity prices have remained high, owing to restricted supply in the energy sector. Although there is still a limited association between the CAD and spreads, positive yield differentials are definitely CAD-supportive. The CAD's link with commodities is increasing slightly, while its association with US stocks/volatility appears to be plateauing.
The Loonie is Primed to Soar
The CAD is expected to appreciate in the following weeks, based on yields, commodities, and seasonal tendencies. Given the strong economy, assertive central bank policy risks, and terms of trade developments in recent months that have yet to be completely reflected in the spot rate, the market's attitude of the CAD has been mixed. Fair value models show that CAD strengthening is ahead of schedule to some extent.
The Week Ahead
The week's schedule is light; Canada and the United States both release April trade figures. The US CPI and Canadian employment figures, including pay growth, are released every Tuesday and Friday. The Bank of Canada's narrative is indicating a lot more concern about very high and still increasing inflation, as well as a very hot economy, which may necessitate more aggressive policy measures. Meanwhile, remarks from Fed policymakers suggest that inflation has peaked, allowing the Fed to slow the frequency of tightening after July. The data from next week will help to shape these respective rate forecasts.
This weeks’ USD/CAD trading range 1.24 – 1.2650
Currency Chart
Get access to our market experts and sign up to receive the latest updates on any currency with our real-time exchange rate reports.
Sign up to receive the latest market news from our experts.
FAQs
Who can use the MTFX payment service?
Individuals and businesses who need to send money in foreign currency internationally can use MTFX’s services. The beneficiary of the transfer must have a bank account for the funds to be paid into.
Personal clients usually use our services to transfer money between their own accounts in two different countries.
Business clients usually use our services to transfer funds to suppliers, fund international operations, or repatriate overseas earnings.
Why should I use MTFX and not my own bank?
MTFX offers currency exchange rates that are 2-5% better than those offered by the banks. Personal clients usually save hundreds of dollars per transfer and for larger transfers, the savings can run into the thousands.
We also offer excellent customer service, dedicated currency specialists, and a 24/7 online platform with best-in-class technology that allows you to complete transfers from any device virtually anywhere in the world.
Business customers save with better currency exchange rates and proven solutions geared towards managing and mitigating foreign exchange risk. Our solutions include forward contracts, market orders, rate alert services, and much more - all backed by great technology and great people.
How do customers send funds to MTFX?
Funds can be transferred via wire transfer, Electronic Funds Transfer (EFT), or ACH payment services. MTFX maintains bank accounts in all major currencies with highly-rated banks. Our banking infrastructure ensures that you can transfer funds to us quickly and securely.
How long does it take MTFX to transfer funds?
Our global network of banking partners allows us to get funds to virtually anywhere in the world quickly and efficiently. Most wire transfers from MTFX will be received by your beneficiary within 24-48 hours. MTFX also offers same-day transfers that are almost instantaneous, as well as low-cost in-country payment services for your less urgent transfers. For further information please speak to one of our currency specialists.