The USD/CAD currency pair experienced selling pressure, trading around 1.3510 during Asian hours on Monday. The U.S. Dollar (USD) saw a decline following comments from Federal Reserve (Fed) Chair Jerome Powell, who indicated that interest rate cuts may begin as early as September.
Powell’s dovish stance, echoed by other Fed officials, has led to a broader weakening of the Greenback. Powell stated, “The time has come for policy to adjust,” and elaborated that “the direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
Philadelphia Fed President Patrick Harker has expressed support for two or three rate cuts in 2024, provided there are no significant changes in U.S. economic data. Meanwhile, Chicago Fed President Austan Goolsbee noted that monetary policy is currently at its most restrictive level, with the Fed now focusing on employment goals. The CME FedWatch Tool shows that traders are almost certain of a 25 basis points (bps) cut in September, with the probability of a larger cut rising to 36.5%, up from 24% the previous week.
In Canada, Statistics Canada reported a 0.3% month-over-month decline in retail sales for June, a slight improvement from the 0.8% decrease in May and in line with market expectations. Retail sales excluding automobiles, however, unexpectedly increased by 0.3% month-over-month, surpassing the anticipated decline of 0.2%. Market participants will be closely watching the Canadian Gross Domestic Product (GDP) data for the second quarter, scheduled for release on Friday. The Bank of Canada (BoC) is also anticipated to implement an additional 75 basis points of cuts by the end of the year.
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