Loonie Slips as Probability of Rates Hike Looks Low

The Canadian dollar weakened today versus its US counterpart and halted the five-day rally against the euro after Mark Carney, the Governor of the Bank of Canada, said that the policy maker would be “careful” in considering whether to raise the interest further and their decision will be influenced by the outlook for the US economic growth. Currently the currency is slowly regaining its strength.

The hawkish statement of the Bank of Canada earlier caused the traders to bet on further rates increases and boosted the loonie. The words of Carney, which diminished the prospect for the rates hike, together with the pessimistic outlook for the US economic growth drove the Canadian currency down. Previously on this trading session the currency was bolstered by the report that the Canadian employers added 36,000 work places in August, more than was expected.

Shaun Osborne, the chief currency strategist at T
oronto-Dominion Bank’s TD Securities unit, thinks that:

We’ll probably see a bit of interest-rate support coming through for the Canadian dollar in the short term, but I don’t think it’s sustainable. We think C$1.0275 is as much as the U.S. dollar is going to do on the downside.

He said that loonie may decline to 1.05 per the US dollar.

USD/CAD went up from 1.0338 to 1.0350 today as of 21:13 GMT after it declined to 1.0282 previously. EUR/CAD traded near 1.3155 after opening at 1.3127 and falling to the intraday low of 1.3069.

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