© Reuters.
By Ketki Saxena
Investing.com The Canadian ended the month as the top performer amongst major G-10 currencies, rising 2.30% in June.
The started the day on a weak note against the US , as choppy trading as showed easing inflation expectations, and data for April showed stagnation in the Canadian economy.
However, the Canadian currency ultimately eked out a gain as investors bet on a 25 bps rate hike from Canada despite uninspiring April GDP, with remaining on track to come in well above the Bank of Canada’s forecasts (particularly given ta surprise 0.4% GDP increase in May, on a preliminary basis.)
The dollar meanwhile weakened against a basket of currencies after data showed a cooling in consumer spending, raising bets that the Federal Reserve may have leeway to turn less hawkish in its fight against inflation.
The optimistic inflation data also helped provide a boost for crude prices, further boosting the commodity-linked loonie.
On a technical level for the pair, analysts at Rabobank note “In light of recent price action, we have revised our short-term forecasts lower to reflect a move back to 1.33 in the coming weeks, and then a return to the 1.35 magnet on a three-month basis but this will require a confirmed close above that critical 1.3260 that implies the move down through the bullish trend was a false breakout.”
“Should we see a move below 1.30, we will need to revise our outlook substantially to reflect a sustained period of trading within the 1.28 to 1.30 region. But to be clear, this is not our base case, and instead, we expect the demagnetizing of the 1.35 handle to prove to be a short-lived phenomenon.”
