CANADA FX DEBT-CAD Hits 2-Week High Powell Rate Cut Forecast – 03/07/2024

The Canadian dollar rose to a two-week high against its U.S. counterpart on Thursday as Federal Reserve Chairman Jerome Powell's wait-and-see comments pressured the greenback and domestic data showed the trade balance remained in surplus in January.

The loonie rose 0.4% to trade at 1.3455, or 74.32 US cents, per dollar, its highest since February 22.

“Today was a dollar story,” said Alex Cohen, forex strategist at BofA Securities. “That's mostly because of Powell's statement.”

The U.S. dollar fell against a basket of major currencies as Powell said in a hearing before the Senate Banking Committee that the central bank was “not far away” from gaining the confidence it needs to cut inflation.

Canada posted a larger-than-expected trade surplus of C$496 million ($367.73 million) in January, following a revised deficit of C$863 million in December, but the details left some economists unimpressed, as did export and…import levels. Refused.

Canadian jobs data out on Friday could provide further clues about the strength of the economy. Economists expect the Canadian economy to add 20,000 new jobs in January.

The loonie extended gains on Wednesday as the Bank of Canada left its key interest rate at a 22-year high of 5%, saying it was too early to consider easing interest rates.

Given the recent slowdown in the Canadian economy, some investors expected the Bank of Canada to lean “more to the dovish side,” Cohen said.

Oil prices, one of Canada's main exports, fell 0.25% to $78.93 a barrel, while Canadian bond yields edged up slightly on the curve.

The 10-year note rose 1.8 basis points to 3.368%, from 3.303% earlier, the lowest level since February 2. (Reporting by Bergl Smith, Editing by Nick Zieminski)