The USD/CAD currency pair fell to approximately 1.3460 during Thursday’s Asian trading session, as the Canadian Dollar (CAD) weakened while the US Dollar (USD) struggled to maintain its recovery from Wednesday. The US Dollar Index (DXY), which measures the Greenback against six major currencies, eased from 101.18 following a rebound from a recent annual low of 100.50.
The USD’s trajectory remains uncertain as investors await the release of the United States core Personal Consumption Expenditure (PCE) price index data for July, scheduled for Friday. Expectations are for the PCE report to reveal a year-on-year core inflation rate increase to 2.7%, up from 2.6% in June, with monthly inflation anticipated to rise by 0.2%. This data is likely to impact market predictions regarding the Federal Reserve’s (Fed) monetary policy for September.
Currently, market participants are largely anticipating that the Fed will initiate interest rate reductions in September, but opinions are divided on whether the cut will be gradual or more substantial. The CME FedWatch tool indicates a 34.5% probability for a 50-basis point rate cut, with the majority of traders expecting a reduction of 25 basis points.
On the Canadian side, attention is also focused on the release of monthly and Q2 Gross Domestic Product (GDP) data, set for Friday. The GDP report is projected to show minimal expansion in June, following a 0.2% growth in May. Annually, the Canadian economy is expected to have grown at a slower rate of 1.6%, down from the previous figure of 1.7%. A weaker economic outlook could heighten expectations for further interest rate cuts by the Bank of Canada (BoC).
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