The Canadian Dollar’s Decline on Friday
- Overview: The Canadian Dollar (CAD) experienced a decline against major currencies on Friday.
- GDP Growth: Despite a higher-than-expected GDP growth in Canada for July, the CAD weakened.
- US PCE Inflation: Market attention shifted to the US PCE inflation data, impacting currency movements.
On Friday, the Canadian Dollar (CAD) faced a setback against its major currency counterparts, with a decrease of nearly one-third of one percent against the US Dollar. Despite Canada reporting a positive GDP growth figure for July, the market response was subdued, as investors focused on the US PCE inflation data, which has implications for future rate cuts.
Canada’s GDP exceeded expectations in July, but the CAD’s performance was overshadowed by the US PCE inflation release. The cooling trend in headline PCE inflation in August contributed to maintaining a balanced risk appetite in the market.
Daily Digest of Market Movers
- Canadian MoM GDP increased to 0.2% in July, surpassing the expected 0.1% and showing growth from the previous month.
- Despite positive Canadian GDP growth, the CAD remained under pressure on Friday.
- US PCE inflation decreased faster than anticipated in August, dropping to 2.2% YoY compared to the forecasted 2.3%.
- Core PCE inflation rose to 2.7% YoY from the previous 2.6% level.
- Market expectations of a double rate cut by 50 bps have increased to 55% according to CME’s FedWatch Tool.
Canadian Dollar Price Forecast
The CAD is currently trading in a consolidation phase against the USD, with the USD/CAD pair moving within recent highs and lows. The pair is trading below the 200-day Exponential Moving Average (EMA) in a sideways pattern.
Although the USD/CAD pair has recovered from recent lows near 1.3450, bullish momentum for the US Dollar is limited, despite breaching the 1.3500 level on Friday.
USD/CAD Daily Chart
Canadian Dollar FAQs
- Interest Rates: The Bank of Canada’s interest rate decisions influence the CAD value.
- Oil Prices: Oil price fluctuations impact the CAD due to Canada’s reliance on oil exports.
- Inflation: Inflation rates can affect the CAD value based on central bank policies.
- Economic Data: Macroeconomic indicators like GDP and employment data impact the CAD.