USD/CAD finds intraday strength
Daily Currency Update
The USD/CAD pair saw some buying interest after a minor retreat from the 1.3675 level, which marked its highest level since March 28. Nevertheless, spot prices are finding it challenging to fully exploit this slight intraday recovery. At the start of the European session, they are currently hovering around the mid-1.3600s, registering a gain of less than 0.10% for the day. Yesterday the Bank of Canada (BoC) indicated the possibility of increasing interest rates to address inflation. Market observers appear to be convinced that the BoC might swiftly lower rates given signs of a significant slowdown in the Canadian economy. Such a move could diminish demand for the CAD and bolster the outlook for to currency. As per recently released July building permits data, the cumulative worth of building permits in Canada dropped by 1.5% from the previous month’s $11.7 billion. This decline followed a positively revised 7.5% surge in the prior month and differed from market predictions of a 5% downturn. This decrease marked a reversal from two consecutive months of growth. The reduction in the overall monthly value of non-residential permits was notable, falling by 11.5% to reach $4.3 billion in July.Key Movers
The US dollar Index (DXY) continues to experience strong buying momentum, nearing the 105.00 level today. The index has been on the rise for the third consecutive session today, consistently supported by the notable upward movement in US yields witnessed in recent days.This recent dollar price movement coincides with growing market expectations that the Federal Reserve is likely to commence interest rate reductions in the second quarter of 2024. The USD’s overall strength today is primarily driven by a resurgence in treasury yields during the overnight session. The 10-year note is currently hovering around 4.30%, a notable increase compared to its level of 4.06% just one week ago. Another point of support for the US dollar is the positive performance of the US ISM Services Purchasing Manager’s Index (PMI), which exceeded expectations and reached a six-month high of 54.5 in August.
Additional downward pressure on the euro has intensified against the USD, leading the EUR/USD pair to retreat below the crucial 1.07 support level and establish a fresh three-month low today. The European Central Bank (ECB) convenes in the upcoming week, with the market assigning approximately a 33% likelihood of a 25 basis point (bps) rate increase. Yesterday, Klaas Knot a member of the Governing Council, expressed his belief that the market was undervaluing the possibility of a rate hike. He is scheduled to speak again today, along with several other ECB representatives.
The GBP/USD pair is in a consolidation phase trading near the 1.25 level during the Asian trading session. At the same time, the DXY is hovering around 104.80 after pulling back from its highest point since March. The strength of the US dollar, supported by treasury yields and PMI data shows a stark comparison to the British pound which faced depreciation following a dovish statement from the Bank of England (BoE) Governor Andrew Bailey yesterday. Bailey indicated that the BoE is nearing the conclusion of its current cycle of interest rate increases.
Expected Ranges
- EUR/CAD: 1.4599 - 1.4658 ▲
- GBP/CAD: 1.6994 - 1.709 ▼
- AUD/CAD: 0.8689 - 0.8731 ▼
- USD/CAD: 1.3634 - 1.3671 ▲