The USD/CAD pair is trading lower around 1.3675 during the Asian session on Monday. The signs of easing inflation in the United States are bolstering hopes for a Federal Reserve rate cut, which in turn is undermining the US Dollar (USD). Investors are also eyeing the US ISM Manufacturing PMI for June, set to be released later today, for further direction.
Recent data from the Commerce Department showed that the US core Personal Consumption Expenditures (PCE) index, the Federal Reserve’s preferred inflation gauge, rose 2.6% year-over-year in May, down from 2.8% in April, aligning with forecasts. Similarly, the headline PCE increased by 2.6% YoY in May, compared to 2.7% in the previous month, also matching expectations. This softer inflation data has put downward pressure on the Greenback against the Loonie.
San Francisco Federal Reserve Bank President Mary Daly remarked on the effectiveness of current monetary policy, noting slowing growth, spending, and labor market activity, alongside declining inflation.
On the Canadian Dollar (CAD) front, rising crude oil prices are providing support due to Canada’s significant role as a major oil exporter to the United States. Higher oil prices typically bolster the CAD, benefiting the commodity-linked currency.
Furthermore, inflation in Canada remained elevated in May, creating uncertainty around the Bank of Canada’s (BoC) upcoming interest rate decisions. According to Deloitte’s Economic Outlook Summer 2024, the BoC is expected to hold off on rate cuts until September, followed by another cut in December. Rate reductions are anticipated to continue through 2025, with the overnight rate expected to stabilize at a neutral level of 2.75% by the end of next year.
Related Topics:
