As the USD/CAD pair dips near 1.3815 in Asian trading on Friday, investors are digesting the news of stronger-than-expected economic activity in the US during the second quarter. The recent rate cut by the Bank of Canada (BoC) has put pressure on the Canadian Dollar (CAD), leading to the pair trading near its highest level since April 17.
The US Real Gross Domestic Product (GDP) for the April-June period exceeded market expectations, expanding at a 2.8% annualized pace. This positive data has increased the likelihood of the US Federal Reserve (Fed) maintaining its benchmark interest rate at the upcoming July meeting, as indicated by the CME FedWatch Tool.
Despite the Fed’s stance, the release of the US Personal Consumption Expenditures (PCE) data later in the day could impact the Greenback and influence the USD/CAD pair’s movement. Additionally, the BoC’s recent rate cut and expectations of further easing have weighed on the CAD, with markets predicting another rate cut in September.
Furthermore, the recovery of crude oil prices could provide support to the CAD, as Canada is a major exporter of oil to the US. Higher oil prices generally benefit the Canadian Dollar, offsetting some of the negative pressure from the BoC’s rate cuts.
Analysis:
The USD/CAD pair is trading lower due to stronger US economic data and the impact of the BoC’s rate cut on the CAD. Investors are closely watching upcoming Fed meetings and economic indicators to gauge the future direction of the pair. The influence of oil prices on the CAD and market sentiment towards riskier assets also play a key role in determining the pair’s movement.