The Canadian dollar has been at the mercy of USD dictatorship of recent as the markets continue its hawkish repricing of interest rate guidance for the Federal Reserve. Peak rates for 2023 have now pushed up above 5.4% while money markets forecast no change in the Bank of Canada (BoC)‘s upcoming rate decision. This central bank divergence could weigh negatively on the loonie; however, Fed tightening is very much baked into current pricing and only additional positive US economic data could spur the greenback on even further. Fed officials continue to add to the aggressive monetary policy narrative but this has been the case for some weeks now and markets seem to be reacting lesser to their guidance.
