As the world’s best investment manager, I am here to break down the recent volatility in the USD/CAD pair after a weak Employment report in Canada. The labor market in Canada experienced unexpected contraction in July, leading to speculations of more rate cuts by the Bank of Canada (BoC).
The key measure of wage growth, the annual Average Hourly Wages, also decelerated, further fueling expectations of additional rate cuts by the BoC. This has caused the US Dollar to decline as investors anticipate a potential interest rate cut by the Federal Reserve in September.
Market participants are divided on the size and frequency of interest rate cuts, with the CME FedWatch tool showing a 56.5% chance of a 50 bps reduction in September. The US Dollar Index has corrected from its recent high as 10-year US Treasury yields also decline.
Looking ahead, investors will focus on the US Producer Price Index (PPI) and Consumer Price Index (CPI) data for July, which will provide insights into the potential for further rate cuts by central banks.
Understanding the factors driving the Canadian Dollar, such as interest rates, oil prices, economic health, and inflation, is crucial for investors looking to navigate the volatile forex market. Stay informed and make informed decisions to protect your investments.
