• USD/CAD reaction was muted, with the pair seesawing in the 1.3160-1.3201 range, on the BoC decision.
• The Bank of Canada opened the door for further hikes as core inflation continued broadening.
• Fed’s Mester: To decide the size of the hike in the September meeting.

The USD/CAD is soaring despite the recent decision of the Bank of Canada to hike rates by 75 bps, from 2.50% to 3.25%, amidst a mixed market sentiment, with most global equities tumbling, except for US stocks. At the time of writing, the USD/CAD edges up 0.18%, trading at 1.3173, above its opening price.

USD/CAD extends its gain, despite BoC’s rate hike

The Loonie failed to gain traction after the BoC decided to hike rates. The central bank noted that they would need to rise further, given the inflation outlook. According to the BoC, core inflation continues broadening, particularly in services, reiterating its commitment to price stability and adding that it would take action as required to achieve the 2% goal.

The USD/CAD seesawed on the headlines, edging towards 1.3163 and then surging to 1.3201 before stabilizing at current exchange rates.

In the meantime, the Canadian economic docket also revealed the Ivey Purchasing Managers Index for August, which came at 60.9, seasonally adjusted, whine unadjusted rose by 57.1.

At the same time, the Cleveland Fed President Loretta Mester was crossing newswires. Mester said that the last labor market report flashed signs of moderation. She added that markets need to focus on the path of interest rates rather than “one particular meeting.” Furthermore expressed that she will decide the size of rate hikes in the September meeting, and she’s not convinced that inflation has peaked yet.

Earlier, the US trade deficit narrowed in July, as exports recorded a high, which could see trade continuing to contribute to the Gross Domestic Product (GDP) in the third quarter.

On Thursday, an absent Canadian economic docket would leave traders lying on the dynamics of the greenback. The US calendar will release Initial Jobless Claims for the week ending on September 3, alongside Fed speakers led by Chairman Jerome Powell. Chicago Fed President Charles Evans and Minnesota’s Neil Kashkari.

USD/CAD Key Technical Levels