The US dollar started the day soft but has completely turned around. With that, a 90-pip fall in USD/CAD to the lowest levels since November has been completely erased and the pair is trading flat today at 1.2489.
The catalyst was a comment from the Fed's Brainard:
Currently, inflation is much too high and is subject to upside risks. The Committee is prepared to take stronger action if indicators of inflation and inflation expectations indicate that such action is warranted.
Fed funds probabilties now suggest an 81% chance of a 50 bps hike, up from 71% before the comment. She also said the Fed will run down its balance sheet faster than in the last cycle, though that's something many FOMC members have said before.
Her comments turned around the mood in all markets and sent US Treasury yields to fresh cycle highs, up 7-14 bps across the curve. That hammered stocks (particularly the Nasdaq, which is down 2.3%) and reversed gains in oil.
With that change in mood, the loonie has been pulled back down to unchanged. Despite that, the Canadian dollar made good gains against the yen, pound and euro today with the BOC expected to keep pace with Fed rate hikes and quantitative tightening.
Looking ahead, this is an ominous comment from Bank of America: "Sales of consumer discretionary stocks have accelerated in recent weeks and last week were the largest ever in our data history since 2008."