Canadian dollar depreciates as investors digest smaller than expected rate hike

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar             1.3575-1.3675

Euro                     1.3600-1.3700

Sterling                1.5700-1.5800

WTI Oil (opening level) $88.00

The US Dollar index is marginally weaker this morning as the market expectation that the Federal Reserve may start to ease the pace of interest rate hikes into next year continues to weigh on the Greenback.

As I write, the European Central Bank as expected has announced a 0.75% increase to its key deposit rate which will take the rate to 2%, the highest rate in over 13 years. The initial reaction to the news is seeing EUR.USD fall to trade near 1.0030 down form an overnight high of 1.0090. Given the weakness in the Dollar at the moment I would have expected the Euro to climb a bit more so we shall see what happens after the latest US GDP report comes out.

The Canadian Dollar is weaker this morning as the Bank of Canada only increased interest rates by 0.50% where the market was expecting a 0.75% increase. I think the Bank is trying to find a happy place by fighting inflation but also making the upcoming recession as mild as it can be. The Bank has indicated that more interest rate hikes are on the way so the Loonie may hang in there a bit longer, it all depends on what happens with US interest rate hikes now.

All market eyes this morning will be on the US 3rd Quarter GDP report which is expected to show a rebound in the US economy from a negative first half of the year. We also get the US Durable Goods report and that is expected to show a rebound in orders so some good news about the US economy which in fact may help make some decisions about further interest rate hikes easier for the Fed.

Stocks are pointing higher at the moment and the Dollar is recovering on the weaker Euro so we may see USD.CAD move a bit higher this morning.