The US dollar surged across the board as the Fed surprised with a hawkish statement, especially regarding the labor market.
In this sea of USD strength, there is one currency that stands out: the Canadian dollar. No, wasn’t strong enough to come on top against the greenback, but it weakened less than others, with USD/CAD eventually falling back under 1.12.
The Federal Reserve had a more upbeat picture of the US labor market: “solid job gains” and “diminishing underutilization” were not what markets had in mind. Also the view about inflation was not that worried and no mention about global worries appeared in the text. Together with a dovish dissenter (for a change), the result was a stronger dollar.
USD/CAD did rise above 1.12 and peaked just above 1.1220, but this is still far below the levels seen in the previous dollar storm. A stabilization in oil prices was one of the things that boosted the loonie.
However, there’s another reason to be constructive on the C$: a stronger US economy means more demand for Canadian goods. This is usually more important than oil prices.
Just after the Fed decision, the governor of the Bank of Canada spoke, but didn’t say anything materially new.
More CAD: USDCAD: Declines, Eyes Further Downside