The USD/CAD Pair in Tuesday’s Early Asian Session
- USD/CAD weakens around 1.3530 in Tuesday’s early Asian session.
- Several Fed officials open the door to further large interest-rate cuts by the end of this year.
- Investors will closely watch the speeches from Fed’s Bowman and BoC’s Tiff Macklem on Tuesday.
Overview
The USD/CAD pair is trading lower around 1.3530 during the early Asian session on Tuesday. The weakness in the Greenback is driving the pair lower. Investors are keeping a close eye on the US September Consumer Confidence data, as well as speeches from Federal Reserve Governor Michelle Bowman and Bank of Canada Governor Tiff Macklem.
Fed Officials’ Views
Several Fed officials have indicated the possibility of additional large interest-rate cuts later this year. Chicago Fed President Austan Goolsbee mentioned that more rate cuts could help the US central bank achieve a soft landing for the economy and manage inflation without negatively impacting the labor market. Meanwhile, Atlanta Fed President Raphael Bostic highlighted the benefits of a large rate cut to bring interest rates closer to neutral levels. Minneapolis Fed President Neel Kashkari also expects further rate cuts at the central bank’s upcoming meetings.
US Economic Data
The flash reading of the US Purchasing Managers Index (PMI) showed a slight slowdown in manufacturing activity in September, while the service sector continued to decline gradually. The Manufacturing PMI dropped to a 15-month low of 47.0 in September, worse than expectations, while the Services PMI eased to 55.4 in August. These data points are influencing market sentiment.
Impact on USD/CAD
Despite the US economic data, the bigger-than-expected Fed rate cut and expectations of further reductions could continue to weaken the Greenback against the Canadian Dollar in the near term.
BoC Governor’s Speech
Bank of Canada Governor Tiff Macklem is set to speak later on Tuesday. His speech might provide insights into potential interest rate cuts by the Canadian central bank. Analysts are watching for any indication of over-correction in monetary policy that could impact inflation levels.
Canadian Dollar FAQs
Here are some key factors driving the Canadian Dollar (CAD) and influencing its value:
Interest Rates
The Bank of Canada (BoC) sets interest rates, impacting the value of the CAD. Higher interest rates are generally positive for the Canadian Dollar.
Oil Prices
Oil is Canada’s largest export, so changes in oil prices directly affect the CAD. Higher oil prices usually lead to a stronger CAD.
Inflation
Inflation levels can influence central bank decisions and impact the value of the CAD. Higher inflation may attract global investors and strengthen the currency.
Macroeconomic Data
Economic indicators like GDP, PMIs, and employment data can affect the CAD. A strong economy is typically positive for the Canadian Dollar.
Trade Balance
The Trade Balance, reflecting exports and imports, can impact the CAD. Positive trade balances usually support the currency.