• Bank of Canada holds rates steady at 5.00% for a second straight meeting; keeps door open for future hikes
• Canadian dollar initially falls to a 7-month low against the greenback
• Easing war fears keep oil prices remain heavy but they are off session lows

The Bank of Canada kept rates on hold at 5.00% for a second straight time. The bank upgraded their inflation forecast, which means they are maintaining a tightening bias going forward.  The BOC statement noted that the council is “concerned that progress towards price stability is slow and inflationary risks have increased, and is prepared to raise the policy rate further if needed.” ​ Overnight index swaps are showing a 35% chance the BOC will raise rates over its next two meetings. ​

The Canadian dollar held onto earlier losses, mostly due to the strong US dollar that emerged from a surge in Treasury yields.  We are seeing a stronger greenback here as expectations grow for the Treasury to once again ramp up sales with the November 1^st quarterly refunding statement.

USD/CAD Daily Chart

Oil

Crude prices are lower after US stockpiles unexpectedly rose and on reports that Israel has agreed to delay its invasion of Gaza.  Geopolitical risks will simmer but for now the easing of war escalation fears have kept oil prices under pressure.  The EIA crude oil inventory report didn’t help oil as demand broadly softened and as Cushing supplies surged the most since June.  The headline stockpile build of 1.37 million barrels per day was against yesterday’s API draw of 2.67 million bpd ​ and today’s consensus estimate for a 477,000 stockpile decline.

Oil is vulnerable to further selling pressure, especially if the strong dollar trade has returns.  WTI crude might test the $80 level, with buyers possibly waiting to return between the $76.55 to 79.50 range.

WTI Crude daily chart

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at [email protected]. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.