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In short, the FedвЂ™s shift in inflation policy should keep US rates near zero for the foreseeable future, keeping the US dollar relatively weaker, since they are in no rush whatsoever to raise interest rates regardless of the speed of recovery for the US economy. Federal Reserve Chairman Jerome Powell outlined an вЂњaccommodative policy changeвЂќ that is believed could result in inflation moving slightly higher, and interest rates staying lower for longer. A prime example of this is the current sell-off of the US dollar, back to pre-COVID-19 levels. While market traders traditionally look to economic data (GDP, inflation, unemployment figures, retail sales, consumer and business confidence, etc.) to determine the strength of an economy and, therefore, the strength of a currency, weвЂ™ve seen a big shift to general sentiment affecting currency rates. With the initial shock and awe subsiding, the Canadian dollarвЂ™s impressive recovery saw the interbank market rate retrace to just a few dozen вЂpipsвЂ™ over 1.3000 again. When the markets are gripped with uncertainty, the US dollar strengthens as traders rush to вЂsafe havensвЂ™.Д«y the end of August 2020, USD/CAD had settled back to the levels we saw in a COVID-19-free world. With the United States reporting record job losses вЂ“ millions upon millions of Initial Jobless Claims piling up each Thursday вЂ“ and with the Federal Reserve taking no time in cutting benchmark interest rates from 2% to 0.25% (and thus diminishing the dollarвЂ™s investment appeal against most other major currencies), the US dollar would, in normal times, have weakened. USD/CAD trading chart, Jthrough September 14 2020.

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Having sat in a trading range of around three percent, the loonie weakened against the greenback by a full ten percent in early March 2020 вЂ“ spiking all the way up to 1.4660.

Back to levels not seen in over a decade, since the Global Financial Crisis of 2008. Markets panicked and plummeted, Central Banks slashed interest rates and commodity currencies such as the Canadian dollar were hammered, as oil prices briefly went negative. All very serene and, dare I say from a currency traderвЂ™s perspective, dull.ДЄs more news started to filter out of China of a new and deadly strain of coronavirus in January of this year, and governments across the world realized that its spread was rapid and far-reaching, we found ourselves in an unprecedented lockdown. For the second half of the year, USD/CAD exchange rates bounced around in a tight range and struggled to break below 1.3000, or higher than 1.3350. West Coast, AFEXДў019 was a relatively calm year for currency markets. By: Robert BollГ©, Regional Manager - U.S.

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