USD/CAD has drifted to a three-session low under 1.2100, returning focus to Friday’s 28-month low at 1.2062. Action Economics said that they continue to recommend trend following. The Canadian employment report last Friday was supportive of the Bank of Canada’s path to normalize monetary policy.
The BoC hike of last Wednesday was the second tightening of the cycle, following the quarter point hike of July, and came earlier that markets had been anticipating. Policymakers justified the tightening on strong growth, which has been broadening and becoming increasingly self-sustaining.
The BoC has been viewing the Canadian economy as having escaped the drag from the downside oil price shock of recent years.
The storm impact on the U.S., while not appearing to be as bad as feared in the case of Hurricane Irma, may dent the timing of the already slow progress of the Fed toward policy normalization. USD/CAD has resistance at 1.2144-45. Action Economics said they look for an eventual return to levels around 1.1000.