The USD/CAD pair is trading with mild gains around 1.3740 in Tuesday’s Asian session as traders await the release of the US Producer Price Index (PPI) data for fresh impetus. Higher crude oil prices and expectations of a Fed rate cut in September may support the CAD in the near term.
Currently, the Greenback is in a consolidative phase with global markets showing a flat trend. The focus is now on the US PPI data, which is expected to show a decrease from the previous reading. Analysts suggest that a 50 bps rate cut by the Fed is possible, depending on the data, with a majority of odds priced in for September.
Fed Governor Bowman’s comments on inflation and the cautious approach to policy adjustments indicate a potential rate cut by the Fed in September. On the other hand, the Bank of Canada is expected to make two rate cuts later this year, which could limit the CAD’s upside. However, higher oil prices and hopes of a Fed easing cycle in September may provide some support to the CAD.
Canadian Dollar FAQs
Key factors affecting the Canadian Dollar include interest rates set by the Bank of Canada, oil prices, the country’s economy, inflation, and trade balance. The BoC plays a significant role in influencing the CAD through interest rate decisions. Oil price movements have an immediate impact on the CAD due to Canada’s reliance on petroleum exports. Inflation can also affect the CAD, with higher inflation leading to increased demand for the currency. Macroeconomic data releases, such as GDP and employment figures, can also impact the CAD’s value.