USD/CAD to close on weekly decline amid hawkish Fed speaks

The USD/CAD pair is expected to end a third consecutive week of decline as hawkish Fed speakers limit the pair’s upside potential. On Friday, the USD/CAD continued its downward momentum dropping to a low of 1.3188 and it is set to confirm a 100 pips weekly decline. At the time of writing, the pair is even lower; trading at 1.3178.

Expectations that the rate peak of the Fed (Fed) will weaken the US Dollar persist but an upbeat Consumer Confidence Index from the University of Michigan and hawkish Fed speakers limit the downside potential.

The University of Michigan (UoM) reported that the Michigan Consumer Sentiment Index for June surpassed expectations at 63.9, indicating increased consumer confidence compared to the previous figure of 59.2. Additionally, the five-year Consumer Inflation Expectation dropped to 3% from the anticipated 3.1%. These positive data points helped strengthen the US Dollar.


After the FOMC released its monetary policy statement and updated dot plots on Wednesday – indicating a projected additional tightening of 50 basis points – various speakers from the Fed reiterated on Friday their concern with inflation, showing their willingness to continue hiking. Christopher Waller of the Fed expressed concerns about the lack of progress in core inflation and suggested the possibility of further monetary policy tightening if necessary, while Thomas Barkin argued that he is comfortable “doing more” if the data warrants it.

The Fed has expressed concerns about inflation and is willing to continue hiking. Fed officials expressed concerns about the lack of progress in core inflation and suggested the possibility of further tightening. As a response, the US bond yields are seeing gains across the curve.

The USD/CAD retreats to a multi-month low of 1.3188 last seen in September 2022 as rising oil prices give traction to CAD. The 10-year bond yield rose to 3.78%, while the 2-year yield stands at 4.74% and the 5-year yielding 4.00%, respectively, with all three seeing more than 1% increases on the day.