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  • USD/CAD trades close to 1.2600 and has stuck within recent ranges ahead of a speech from BoC Governor Macklem.
  • Broadly dovish remarks from Fed Chair Jerome Powell seem not to have shifted the dial much for USD.

USD/CAD has been choppy since the start of the US trading session in tandem with a choppy US dollar which has seen two-way price action in wake of remarks from the Chairman of the US Federal Reserve in his semi-annual testimony before Congress. However, the pair has stuck to recent ranges, posting highs in the 1.2640s, just shy of last Friday’s 1.2654 high and printing lows in the 1.2580s, just above Monday and last Friday’s lows.

Powell’s remarks do not seem to have shifted the dial much for the US dollar; Powell reiterated the Fed’s dovish monetary policy guidance as expected and when asked about recent gains in US bond yields, did not seem to concerned, saying they moves reflected greater optimism about economic growth and inflation (perhaps not as dovish as some had hoped). On inflation, Powell was a little more dovish, playing down “over-heating” concerns, though reiterating that the Fed would have the tools to deal with any overheating.

On the day, USD/CAD only trades marginally lower close to the 1.2600 level, which is not a bad effort by the loonie considering that stocks in the US have been getting hammered and crude oil markets have been choppy, conditions that would usually be a negative for the loonie.

Macklem speech incoming

Rangebound conditions are perhaps unsurprising ahead, with Bank of Canada Governor Tiff Macklem scheduled to speak at 17:30GMT. A lot of focus is currently on how global monetary policymakers view recent bond market views and Macklem’s speech will be no exception. Canadian government bond yields have seen something of a melt-up since the start of the year, rallying from around 0.7% to current levels in the mid-1.20s%. Macklem has expressed concerns about the impact that recent CAD appreciation, particularly versus the US dollar, is going to have on Canadian exporters. Hi might use this speech as an opportunity to differentiate himself from Fed Chair Jerome Powell, who did not sound to concerned about recent bond yield upside, by saying something similar to what ECB President Christine Lagarde said earlier in the week such as “the BoC is watching developments in long-term bond yields” – this would weaken CAD versus the USD.


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