The Loonie pair tried to bounce from 1.2940 in the New York session and is now facing barriers around 1.2980 as the US dollar index has stabilized around 108.00. Earlier, the asset displayed wild swings after the Bank of Canada raised its interest rate by 100 basis. Adding to that, the strong Consumer Price Index (CPI) report by the US also added fuel to the fire.
BOC Governor Tiff Macklem announced a rate hike by a massive figure of 1% to 2.5%. The consensus for the extent of the rate hike was 75 basis points (bps). It takes a cold heart to announce a mega rate hike. To tame the inflation, the BOC was forced to create difficulties for the borrowers.
Meanwhile, the DXY rebounded firmly after hitting a low of 107.48 on Wednesday. The inflation rate in the US economy has climbed to 9.1%, much higher than the estimates and the prior release of 8.8% and 8.6% respectively. Apart from that, the core CPI has been trimmed to 5.9% from the former print of 6%.
The higher inflation rate has boosted the odds of one more 75 bps rate hike by the Federal Reserve. No doubt, the Fed could also follow the footsteps of the BOC and may announce a rate hike by 100 bps as the plain-vanilla CPI has surpassed 9% and prior rate hikes have managed to bring a minute trim in the core CPI.
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