- USD/CAD trims part of last Friday’s losses and is up 0.46% on Monday.
- Weaker-than-expected US economic data and a surge of risk aversion in the currency complex bolstered the US dollar (USD).
- On Wednesday, the Bank of Canada (BOC) met to limit Canadian dollar (CAD) losses.
The USD/CAD is advancing strongly amid a risk-off drive in the currency space as S&P global PMIs hint that global economies could slip into recession, while the dollar has clawed back some losses, trading positive as outlined by the Dollar Index (DXY), which rose 0.08%, to 111,961. At time of writing, USD/CAD is trading at 1.3705, up 0.44%.
US S&P Global PMIs supported the dollar, amid risk aversion in currency markets
S&P Global reported that in its final readings, the preliminary US October PMIs confirmed that the economy is contracting for the fourth month in a row. The manufacturing and services components of the composite index missed estimates and fell short of September’s figures. As a result, the S&P Flash Composite Index fell to 47.3, from 49.5 in September, and below estimates of 49.3, as the economic downturn gained momentum, “while confidence deteriorated considerably,” as said S&P Global chief business economist Chris Williamson.
Despite the data being negative for the US dollar (USD), USD/CAD dipped below 1.3700 before resuming its previous uptrend and recovering the figure, hitting a daily high of 1.3774.
Other than this, the Canadian docket is fairly light ahead of Wednesday’s Bank of Canada (BoC) monetary policy meeting, where most economists expect a 50 basis point hike, although the Canadian Market Price Index Consumption (CPI) last week rose to 6.9% year-on-year, below the previous month’s reading, above estimates, changing previous forecasts.
Analysts at TD Securities said the consensus points to a 50 basis point rise to 3.75%, “but there is a strong bias towards 75 basis points by those who presented forecasts after the CPIand markets are pricing in some 67 basis points of tighteningTDS expects the BOC is likely to maintain a hawkish tone in its statement, while acknowledging slower economic growth and downwardly revising inflation estimates for 2022.
As Fed officials reiterated that the US central bank would continue to tighten, albeit opening the door to a slower pace of rate hikes, therefore USD/CAD could consolidate in the 1.3600- 1.3750, ahead of the BoC and Federal Reserve monetary policy meeting. The BOC’s decision will be presented on October 26, while the Fed’s on November 2.
USD/CAD Key Technical Levels
Source: Fx Street
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