USD/CAD Intermarket: 10-year bond yield spread is in the driver’s seat

USD/CAD dropped from 1.3538 (June 9 high) to 1.3211 (June 13 low; also the lowest level since Feb 28). 

The strength in the Canadian dollar is pretty much in line with the narrowing of the US-Canada 10-year yield spread. 

The spread stood at 75 basis points on June 6 and has narrowed to 0.64 basis points. 

The yield spread could narrow further as the Bank of Canada (BOC) has begun telegraphing an interest rate hike. Bank of Canada Governor Stephen Poloz said this week that the central bank could raise interest rates sooner than previously thought.