- USD/CAD erases Monday’s gains and falls more than 0.60%.
- Weaker US housing and PMI data weighed on the USD.
- TDS analysts expect the BoC to rise 75 basis points in September; they estimate the first cut in the third quarter of 2023.
The USD/CAD stumbles from weekly highs around 1.3063 and slumps on weaker-than-expected US economic data, reigniting US recession fears amid a week traders brace for speech from Fed Chairman Jerome Powell.
USD/CAD is trading at 1.2069, below its opening price, after reaching a daily high of 1.3063, followed by a drop to its daily low of 1.2933, before settling at current exchange rates.
USD/CAD fell on weak US housing/PMI data.
Earlier in the American session, S&P Global reported that the US services PMI for August sank into contraction territory, reading 44.1, while the composite index did the same at 47. On the contrary, the manufacturing PMI, although it slowed down, remained in expansionary territory with 51.3, less than estimated.
Separately, US housing data showed New Home Sales sank at their slowest pace since 2016, falling for the sixth month in a row, as the market continues to deteriorate as the Federal Reserve tightens policy. monetary. New Home Sales fell by 0.51 million against estimates of 0.575 million.
Apart from this, the USD/CAD moved from 1.3010 to 1.2975 after the release of the US data. An absent Canadian docket left traders leaning on the dynamics of the US dollar and oil prices. That said, WTI futures contracts were up 3.65%, trading at $93.89 per barrel.
TDS analysts forecast a 75 basis point hike by the BoC and expect the first cut in 2023
On the other hand, TDS analysts estimate that the Bank of Canada will rise 75 basis points in September. They write in a note: “We continue to expect the Bank of Canada to make a 75bp hike before a final 25bp hike to a 3.50% terminal rate in October.”
“While we expect a terminal rate of 3.50% for the Bank of Canada’s tightening cycle, we also expect slower growth to force the Bank to cut rates from the third quarter of 2023, before reaching a long-term neutral rate.” from 2.25% in mid-2024.
What to watch out for
Durable Goods Orders for July will be released on the US economic docket, along with housing data, illustrating the slowdown in the US economy on Wednesday.
USD/CAD Key Technical Levels
Source: Fx Street
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