FX TALKING POINTS:
USD/CAD INITIATES BEARISH SEQUENCE DESPITE HAWKISH FED RHETORIC. CANADA EMPLOYMENT REPORT IN FOCUS.
USD/CAD initiates a fresh series of lower highs & lows even as Federal Reserve officials strike a hawkish outlook for monetary policy, and the rebound from the February-low (1.2247) may continue to unravel amid the failed attempts to break/close above the 1.3130 (61.8% retracement) region.
Fresh comments from Fed Governor Lael Brainard suggest the Federal Open Market Committee (FOMC) will continue to implement higher borrowing-costs over the coming months as unemployment ‘could reach levels not seen in several decades,’ and a growing number of central bank officials may project a neutral Fed Funds rate beyond the 2.75% to 3.00% threshold as ‘the recently enacted fiscal stimulus should boost the economy at a time when it is close to full employment and growing above trend.’ Speculation for an extended hiking-cycle may heighten the appeal of the greenback especially as the Bank of Canada (BoC) remains in no rush to further normalize policy, with USD/CAD at risk of exhibiting a more bullish behavior over the coming months as Governor Stephen Poloz and Co. stick to a wait-and-see approach for monetary policy.
However, another 20.0K expansion in Canada Employment may push the BoC to implement a rate-hike sooner rather than later, and the central bank may strike a more upbeat tone at the next meeting on April 18 should the data prints coming out of the Canadian economy highlight an improved outlook for growth and inflation.