Canadian Dollar Eases Ahead of Fed Rate

The Canadian Dollar eased against key counter-currencies to start the new week, falling against an uptick in the Greenback as investors positioned themselves ahead of the Federal Reserve’s upcoming rate call later in the week.

Why it matters: With limited economic data on the horizon, CAD traders are closely watching for the Wednesday release of Canada’s Gross Domestic Product (GDP) for May and the S&P Global Canadian Manufacturing Purchasing Managers Index (PMI) figures for June on Thursday.

The details:

• Canada’s GDP is expected to ease to 0.1% month-over-month from April’s 0.3%, reflecting a slowing economy.
• The Canadian Manufacturing PMI figures have consistently been in contraction territory, printing below 50.0 since May of 2023.
• The Canadian Dollar is on pace to lose ground against the US Dollar for a ninth consecutive session and has declined against the Greenback for all but one of the last 13 straight trading days.
• After the Bank of Canada delivered another quarter-point rate cut last week, traders switched focus to the odds of another rate cut from the BoC in September, with current odds priced in at roughly even.

Meanwhile, the US Federal Reserve will be a significant market mover this week, as markets anticipate a 25-basis-point rate cut in the near future. The Fed is expected to hold rates steady this week, but traders will be attentive to any verbal cues from Fed Chairman Jerome Powell regarding the September rate decision.

Market Movers:

• On Monday, the CAD fell by roughly 0.2% against the Greenback and slipped by about 0.3% against the recovering Japanese Yen.
• Gains remain limited, with the CAD rising slightly by 0.17% against the Euro and the New Zealand Dollar.

Technical Analysis: The USD/CAD pair continued to climb, marking its ninth straight gain as the Canadian Dollar slipped against the Greenback. The pair has risen 2% from a near-term low of 1.3589, sparking a rally after a technical rejection from the 200-day Exponential Moving Average (EMA).

Factors Driving the Canadian Dollar:

• Interest Rates: Decisions by the Bank of Canada regarding interest rates can have a significant impact on the CAD.
• Oil Prices: As Canada’s largest export, the price of oil directly affects the value of the CAD.
• Economic Data: Indicators such as GDP, Manufacturing and Services PMIs, employment figures, and consumer sentiment surveys can influence the CAD.

The Canadian Dollar is navigating a challenging week ahead, with limited domestic economic data and significant central bank appearances influencing market movements. Traders will be closely watching key data releases and central bank communications to gauge the future direction of the CAD.

Full story

The Canadian Dollar (CAD) eased against key counter-currencies to start the new week. Canada is sparsely represented on the economic calendar this week, leaving the CAD at the mercy of key central bank appearances and broader market flows. The CAD softened on Monday, falling against an uptick in the Greenback as investors positioned themselves ahead of the Federal Reserve’s upcoming rate call later in the week.

With limited economic data on the horizon, CAD traders are closely watching for the Wednesday release of Canada’s Gross Domestic Product (GDP) for May, which is expected to ease to 0.1% month-over-month from April’s 0.3%, reflecting a slowing economy. The S&P Global Canadian Manufacturing Purchasing Managers Index (PMI) figures for June are scheduled for Thursday. These figures have consistently been in contraction territory, printing below 50.0 since May of 2023.

The Canadian Dollar is on pace to lose ground against the US Dollar for a ninth consecutive session and has declined against the Greenback for all but one of the last 13 straight trading days. After the Bank of Canada delivered another quarter-point rate cut last week, traders switched focus to the odds of another rate cut from the BoC in September, with current odds priced in at roughly even. Meanwhile, the US Federal Reserve will be a significant market mover this week, as markets anticipate a 25-basis-point rate cut in the near future.

Canadian dollar anticipation ahead of Fed

The Fed is expected to hold rates steady this week, but traders will be attentive to any verbal cues from Fed Chairman Jerome Powell regarding the September rate decision. According to the CME’s FedWatch Tool, there are 100% odds of at least a quarter-point cut when the Federal Open Market Committee meets on September 18.

On Monday, the CAD fell by roughly 0.2% against the Greenback and slipped by about 0.3% against the recovering Japanese Yen. Gains remain limited, with the CAD rising slightly by 0.17% against the Euro and the New Zealand Dollar. The USD/CAD pair continued to climb, marking its ninth straight gain as the Canadian Dollar slipped against the Greenback.

The pair has risen 2% from a near-term low of 1.3589, sparking a rally after a technical rejection from the 200-day Exponential Moving Average (EMA). Several key factors influence the Canadian Dollar, including interest rates, oil prices, economic data, inflation, market sentiment, and the health of the US economy. The Canadian Dollar is navigating a challenging week ahead, with limited domestic economic data and significant central bank appearances influencing market movements.

Traders will be closely watching key data releases and central bank communications to gauge the future direction of the CAD.