USD/CAD: All eyes on the BoC next week as US dollar reaches for the skies By ross_burland USDCAD Fed BOC CentralBanks Ukraine
USD/CAD presses against daily resistance as the Fed narrative underpins.is holding in the resistance around 1.2590 that was penetrated but simultaneously hamstrung the pair overnight, pulling the pair back from a full breach into the 1.26 area. The US dollar has reached the highest in two years and the US Treasury 10-year yield touched a three-year high following hawkish signals from the Federal Reserve. In Asia, the greenback has extended those highs. DXY, hit a fresh 99.
Underpinning the greenback, the 2 year-10 year spread widened also due to the Fed's plans to reduce its balance sheet. The yield on 10-year Treasury notes was higher by 3.8 basis points to 2.647% while the 2-year note yield was losing 4.5 basis points at 2.457%, leaving the 2-10 spread at 18.72 basis points by the close of play on Wall Street.
Meanwhile, the Fed narrative is keeping a lid on rallies in the commodity currencies and the price of oil tanking to the lowest levels since mid-March has not helped the case for CAD. The minute's Fed released yesterday from the Fed's March meeting underpin the worries of higher prices and reinforce the prospect that the US central bank's balance sheet reduction is imminent. On Thursday, St.
''Roughly a third of the BoC's bond holdings are scheduled to mature by the end of 2023, so we look for the balance sheet to decline relatively quickly through the early phases of QT. However, the Bank has indicated that it doesn't expect to reach pre-pandemic levels of settlement balances, which suggests that CORRA will continue trading below the BoC's target.''
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