The Canadian dollar CADUSD weakened against its U.S. counterpart on Wednesday, pulling back from its strongest level in nearly seven weeks, as risk appetite wavered ahead of key macro events over the coming days.
The loonie was trading 0.2% lower at 1.2550 to the greenback, or 79.68 U.S. cents, after earlier touching its strongest since April 21 at 1.2518.
“It feels like it’s trading in line with how risk is performing today,” said Bipan Rai, North America head, FX strategy at CIBC Capital Markets. “Risk assets seem to be on the defensive.”
U.S. stock indexes fell as higher oil prices deepened worries about global inflation, with investors already on edge ahead of a European Central Bank meeting on Thursday and U.S. CPI data on Friday.
Canada’s employment report for May is also due on Friday, which could help guide expectations for the Bank of Canada policy outlook.
Canada’s central bank has signalled plans to race ahead with a series of oversized hikes to curb inflation, upping the risk of plunging the economy into a recession, say economists, though worth it if it keeps rapid price rises from becoming entrenched.
The price of oil, one of Canada’s major exports, was up nearly 3% at $122.96 a barrel, supported by rising U.S. demand for gasoline despite record pump prices.
Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries.
The 10-year touched its highest since April 2011 at 3.305% before pulling back to 3.263%, up 7.3 basis points on the day.
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