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USDCAD Still Heads Lower Despite Hawkish FOMC

CANADA
  • FI: GoCs see a modest bull flattening on the day with 2YY unchanged at 1.882% (yesterday’s high of 1.925% was the highest since Jan-2019) whilst 10YY are -2bps at 2.366%.
  • The short-end moves in line with Treasuries but the long-end underperforms, leaving the Can-US yield differential at -5bps for 2Y and +2bps for 10Y.
  • FX: USDCAD sits -0.1% at 1.2664, off lows of 1.2652 having tested support at 1.2587, the Mar 3 low and bottom of the post-invasion range. A clear break here would open 1.2552 (76.4% retracement of the Jan19-Feb24 rally).
  • It’s driven by broad dollar weakness with CAD itself surprisingly mixed against other majors despite yesterday’s surging CPI report raising the odds of a larger than 25bp hike even if we’re yet to see analysts outright change their calls in response. The hawkish Fed could well limit a further material slide in the USDCAD.
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