USD/CAD Rises Sharply as Oil Price Slide Weighs on Loonie
The dollar rose sharply against a basket of major currencies as Federal Reserve members hinted at further rate hikes amid signs of inflation and underlying economic growth while a slump in the Canadian dollar also added to upside momentum.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.72% to 90.24.
Federal Reserve Bank of Chicago President Charles Evans said he\'d support further Fed rate hikes should inflation improve, and admitted that he was beginning to see a “hint” of inflation pressures. Yet Evans said, he believes the Fed should not raise rates until mid-year 2018.
Federal Reserve Bank of New York President William Dudley said his outlook for the U.S. economy hasn’t change despite the recent tumble in equity markets.
In Washington, meanwhile, Senate leaders reached a major budget agreement that would increase spending caps, Majority Leader Mitch McConnell said Wednesday. This eased investor uncertainty, and helped to avert a government shutdown just two days before a stopgap funding measure was slated to expire.
The sharp rise in the dollar weighed on both the euro and pound as latter continued to slide ahead of the Bank of England interest rate decision Thursday, when it is expected that the central bank will upgrade growth forecasts and signal tighter monetary policy measures are needed to combat rising inflation.
GBP/USD fell to 0.65% to $1.3859 while EUR/USD fell 0.95% amid investor disappointment that the leader of Germany’s Social Democrats (APD), Martin Schulz, would not be taking up the role as German finance minister.
USD/JPY fell 0.06% to Y109.48, while USD/CAD rose 0.67% to C$1.2577 as the loonie came under pressure after oil prices fell heavily amid data showing US oil supplies rose for the second straight week