- USD/CAD trades with a positive bias for the third day in a row and rises to a new multi-year high.
- Expectations of a further BoC rate cut and a modest drop in crude oil prices weaken the CAD.
- Falling USD caps the pair ahead of US CPI and BoC decision on Wednesday.
The USD/CAD pair hits a new high since April 2020 during the Asian session on Tuesday, although it lacks continuation in buying and remains below the round mark of 1.4200. The near-term fundamental backdrop, meanwhile, appears to be leaning in favor of the bulls and suggests that the path of least resistance for spot prices remains to the upside.
The Canadian Dollar (CAD) remains pressured by expectations of a further interest rate cut by the Bank of Canada (BoC) on Wednesday, reinforced by a rise in the domestic unemployment rate in November. In addition to this, a modest decline in crude oil prices weakens the commodity-linked CAD and acts as a tailwind for the USD/CAD pair, although the lack of continuation in US Dollar (USD) buying limits the upside. rise.
The US Nonfarm Payrolls (NFP) report released on Friday reaffirmed expectations that the Federal Reserve (Fed) will cut interest rates in December. This, in turn, keeps US Treasury yields depressed near October lows and limits the USD’s post-NFP recovery from a near one-month low. However, expectations of a less dovish Fed should help limit any significant USD losses and offer some support to the USD/CAD pair.
Meanwhile, traders could refrain from opening aggressive directional bets ahead of key US macroeconomic data and central bank event risk. The US Consumer Price Index (CPI) report will be released on Wednesday and should offer clues on the Fed’s rate cut path, which will boost demand for the USD. Additionally, the BoC’s policy decision, also on Wednesday, will determine the next leg of a directional move for the USD/CAD pair.
Economic indicator
BOC interest rate decision
He Bank of Canada announces the interbank interest rate. This rate affects a range of interest rates set by commercial banks, building societies and other institutions for their own borrowers and depositors. It also affects exchange rates. If the Bank of Canada is firm on the economy’s inflationary outlook and raises rates, this is bullish for the Canadian dollar, while an outlook for reduced inflationary pressures will be bearish.
Next post:
Wed Dec 11, 2024 2:45 p.m.
Frequency:
Irregular
Dear:
3.25%
Previous:
3.75%
Fountain:
Bank of Canada
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
