At her testimony yesterday, Fed Chair Janet Yellen came across as more dovish than expected. The dollar fell sharply as investors were reminded that future rate rises will be rather gradual. Stock markets love low-interest rate levels and for that reason, they were able to rise sharply which lifted the Dow to a new all-time high. Investors also liked the look of the latest Chinese trade figures that were released overnight.
The U.S. dollar is higher against most major pairs after a jobs report that added more than 200,000 positions. The Canadian dollar was the outlier making gains against the greenback on the back of a similar strong jobs report that validates the hawkish comments from the Bank of Canada in the last three weeks.
The Canadian dollar has outperformed in recent weeks. That’s despite ongoing weakness in crude oil, which is Canada’s main export commodity. So, what’s driving the CAD higher? Expectation about tighter monetary conditions in Canada, after the Bank of Canada delivered a strong hint a couple of week about raising interest rates. Those expectations could be revised however in the event crude oil falls furthers and stays weak, or if incoming data deteriorates once again.