The Bank of Canada increased rates by 25bps as expected yesterday and also signaled that more interest rate hikes could be ahead. BoC’s Governor Macklem stated that the progress in price stability could stall (the fight against inflation) if some upward surprises emerged and inflation could start to go back up. Furthermore, Macklem said that further rate decisions will be guided by incoming data and the inflation outlook. So, will the CAD keep gaining after the BoC’s latest meeting?

On the same day of the meeting, the US CPI print came in lower than expected, with the core reading below forecast, and importantly, below the market’s minimum forecast at 4.8%. These two events on the same day sent the USDCAD sharply lower. Can that fall lower continue?

From a seasonal perspective, there is a marked season of weakness in the USDCAD with falls over 70% of the time between July 12 and July 31. The average fall has been -1.06% and the largest fall was 6.27% in 2009. Will prices drop again this year?

Major Trade Risks: Remember, that previous seasonal patterns do not necessarily play out every year, and don’t forget that shifting narratives and US data could also strongly impact the USDCAD.

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