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Loonie Surges as Hot Inflation Report Raises BOC Rate Hike Odds

Loonie Surges

The Canadian dollar (CAD) is on the rise against the euro (EUR) following a robust inflation report on Loonie Surge. This resulted in creating uncertainty regarding the Bank of Canada’s (BOC) future rate decisions. The surge in inflation, primarily driven by soaring gasoline prices, is expected to impact transportation, delivery, and input costs. With no immediate signs of data deterioration, the market leans toward anticipating more BOC rate hikes.

Yesterday’s indications put the chances of another rate hike at 50/50, but now, another quarter-point rate increase before year-end appears imminent.

The Canadian economy’s performance remains closely tied to oil prices. If oil prices remain elevated, it could pose challenges for Canada, but it may provide a significant advantage compared to other advanced economies.

EUR/CAD Daily Chart

The EUR/CAD daily chart, as of September 19, 2023, reveals a substantial bearish trend that began at the end of August. It broke decisively below a large symmetrical triangle consolidation pattern, present since early May. Currently, the price is trending below key Simple Moving Averages (SMAs) – 200-day, 100-day, and 50-day. This suggests that momentum selling could persist until it reaches the 1.4259 level, with major support at the 1.40 handle. Resistance remains critical at the 1.4500 level.

Oil Market Outlook On Loonie Surge

The rally in crude oil prices shows no signs of abating. The oil market is expected to remain tight throughout the winter, and despite potential developments from the Federal Reserve, crude oil prices continue to climb. Economic resilience in the energy markets seems willing to tolerate oil prices at $90 a barrel, with a rally toward the $100 per barrel mark. Even experts like Citi’s Ed Morse suggest that oil prices might breach $100 per barrel briefly, signaling continued upward momentum.

While Brent crude surpassing $95 per barrel is significant, the focus today is on the Federal Reserve. Their signals could either raise recession concerns or indicate that rates will remain less restrictive with ample liquidity. If the Fed suggests a “higher for longer” approach and increased hard landing risks, it might trigger a significant push for the dollar, potentially affecting oil prices.

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Disclaimer: Please note that this article serves solely for informational purposes and should not be construed as financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions


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