Last week, following ten consecutive increases, the Federal Reserve decided to pause its campaign of interest rate hikes. The Fed also went to great lengths to reaffirm their commitment to bringing inflation below the 2 percent target. The problem was that the markets didn’t buy it.
Investors widely believe that the Fed has reached or is very close to its terminal rate, signaling the end phase of the monetary policy cycle. This, combined with the Bank of Canada’s recent interest rate hike and strong economic data pointing towards a second increase in July, suggests that the Canadian dollar, along with other currencies, will continue to strengthen against the US dollar.
The Canadian dollar is currently trading at 1.3206, having reached a nine-month high against the US dollar on Friday, June 16th. This translates to an almost 3% surge for the Canadian dollar in June compared to the US dollar. After surpassing the 1.32 barrier, the next target price for the USD/CAD pairing would be 1.30.
