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The Fed started tapering as the US labour market appears to be on the road to recovery.
![usd cad exchange rate usd cad exchange rate](https://www.exchangerates.org.uk/images-news2/dollar-rate-today-8.jpg)
This was the first move made by the Fed to start withdrawing stimulus from the coronavirus pandemic period.Ĭreate a trading account in less than 3 min Create account In the November Federal Reserve meeting the US central bank announced that it would start tapering its $120bn asset purchase programme by $15bn a month.
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The US dollar has been rising firmly versus its major peers amid growing expectations that the Federal Reserve could move to raise interest rates sooner than initially anticipated. The Biden administration was keen to bring the price of oil, particularly petrol at the pumps, lower after the Organization of the Petroleum Exporting Countries (OPEC) failed to raise oil production levels despite surging prices. The price of oil fell from 24 October for four weeks until 21 November as the US along with other global leaders started to explore the idea of releasing strategic oil reserves. This means that oil often trades inversely to USD/CAD, which was notably the case across October and November. Often when the price of crude oil – which is priced in US dollars – rises, the value of the Canadian dollar also rises. In addition to central bank policy, the Canadian dollar is also influenced by the price of crude oil, Canada’s largest export. However, with growth showing signs of losing momentum the bank could become more cautious over the path to rate normalisation. The Consumer Price Index (CPI) rose 4.7% year-on-year, the highest level since 2003, and is significantly above the 3% target level set by the BoC. The same supply chain bottlenecks, in addition to rising energy prices, sent inflation in Canada to the highest level in two decades in October. Concerns are growing that ongoing supply chain disruptions and soaring inflation could stall the economic recovery. Overall in the second quarter the economy grew by 0.5%, or 2% annually, as supply chain disruptions started to weigh on the economic recovery. Growth then picked up again in August by 0.4% and was little changed in September. GDP edged 0.1% lower in July, after rising 0.6% in June. However, BoC governor, Tiff Macklem, said in a press conference following October's decision that a rate rise could happen as soon as April.Įconomic growth in Canada has been mixed in recent months. Policy makers also kept interest rates on hold and downwardly revised the gross domestic product (GDP) forecast for the year to 5%, from 6% previously. In the latest Bank of Canada (BoC) monetary policy meeting in October, the BoC ended its asset purchase programme. What has been driving CAD lower against the USD in recent weeks? More recently, USD/CAD has been on the rise again, picking up from 1.2290 to current levels (26 November) of just shy of 1.27. The pair rebounded off 1.20 and rallied to a peak of 1.2950 in mid-August before easing back to 1.2290 in mid-October. Since then the rate has been attempting to push higher. The USD/CAD commenced 2021 at 1.2734 and continued to move lower, hitting a 2021 nadir of 1.20 on 31 May. From there, the USD/CAD moved steadily lower, gaining momentum as vaccine programmes ramped up in Canada and globally. The US dollar to Canadian dollar rate rose to a high of 1.4668 in mid-March 2020 as the pandemic and resulting lockdowns hit global economies, sending investors piling into the safe haven US dollar. How has USD/CAD performed so far in 2021? Here we look at the latest USD/CAD news and analysts’ projections for the forex pair heading across 2022.
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What’s driving the pair higher, and is there more upside to come? “The bank will continue to monitor the potential risks associated with the rapid rise in house prices,” the Bank of Canada said in its statement this week and said it was “tapering” its asset purchases due to the “progress made in the economic recovery”.The US dollar (USD) has gained 5% against the Canadian dollar (CAD) across the past six months. The Canadian Real Estate Association calculates house prices have climbed 17 per cent in 12 months. The Canadian central bank’s decision to cut back its bond purchases – quantitative easing (QE) – was due to Canadian house prices, employment and the currency. The Bank of Canada’s announcement in late April to bring forward the time when it expects to raise interest rates helped the Canadian dollar to rise up above US80 cents (USD below C$1.23). USD Outlook Risks associated with Canadian house prices The gains can be attributed to more ‘hawkish’ commentary from the US Federal Reserve, especially in comparison to the European Central Bank.Īccording to OFX the USD trend for October is unclear. The USD had a strong month in September, outperforming all the G10 currencies.