Daily Afternoon Report 26.10.2016
The Canadian dollar slid lower against its broadly weaker U.S. counterpart on today, pressured lower by falling oil prices and after the Bank of Canada struck a more dovish tone last week.
Oil prices fell around 2% on today as an increase in U.S. inventories, rising output in Nigeria and doubts over planned output cut by major producers sparked fresh fears over a global supply glut.
The Canadian dollar remained on the defensive after the BoC indicated that it had considered cutting interest rates for the third time in two years at last week’s policy meeting.
BoC Governor Stephen Poloz said on Monday that any additional easing would bring the central bank closer to unconventional monetary policy and added that the decision on whether to cut rates again is not one to take lightly.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last at 98.48, after hitting highs of 99.09 overnight, its highest level since February 1.
The index has rallied so far this month as hawkish remarks by Fed officials in recent weeks cemented expectations for a rate hike before the year’s end.
Expectations for higher interest rates typically boost the dollar by making the currency more attractive to yield-seeking investors.
The Fed’s next meeting is in November, but a rate hike ahead of the presidential election is seen as unlikely.
Investors currently price a 68.4% chance of a rate hike at the Fed’s December meeting, according to federal funds futures tracked Investing.com’s Fed Rate Monitor Tool.
Investors were turning their attention to data on U.S. third quarter growth due for release on Friday for further cues.