USD/CAD Weekly Forecast: Can the Bank of Canada break the loonie free? by JosephTrevisani usdcad BOC forex
Treasury yields in the US have retreated from their mid-month highs with the benchmark 10-year closing at 3.136% on Friday, down 10 basis points on the week and 35 points from the June 14 top at 3.480%. The 2-year note shed 13 points from last Friday to finish at 3.063% and was off 23 points from its June 14 peak at 3.422%.
On the week, the US 10-year yield lost 10 basis points, WTI dropped 1.8% and the USD/CAD slipped 1.1% from 1.3038 to the above 1.2893. With the Core Personal Consumption Expenditures Price Index at 4.9% in April and forecast to be 4.7% in May, that would place the final base rate more than 100 basis points above the 3.4% projected by the central bank at the end of this year and 200 points above the current upper target of 1.75%.
Markets have become increasingly concerned that the combination of aggressive Fed and BoC monetary policies and inflation will bring on a recession. The possibility has grown as some forward-looking data has weakened but the likelihood is that a recession would strike the US and Canadian economies simultaneously.