Weak US data puts downward pressure on USD/CAD
Daily Currency Update
USD/CAD traded near 1.35270 as poor economic data from the US has put downward pressure on the pair. Furthermore, the increase in crude oil prices provided a boost to the Loonie in relation to the USD, given that Canada stands as one of the leading oil exporters to the US. West Texas Intermediate (WTI) oil was last seen trading near 80.890 a barrel. Friday will see the release of Q2 GDP figures. Investors are expecting that the growth rate of the April-June quarter was slower compared to the pace of Q1, driven by concerns of potential interest rate increases by the Bank of Canada (BoC).Key Movers
The US dollar index (DXY) dropped to a two-week low of 102.936 due to weaker-than-anticipated US economic data. This has led to increased speculation that the Federal Reserve might halt interest rate increases. These developments follow recent data indicating that consumer confidence in the US plummeted the most in two years during August. This decline can be attributed to negative perceptions of the job market, rising borrowing costs, and ongoing inflation. Further data revealed that in the second quarter of 2023, the growth rate of the US economy reached an annualized 2.1%, which is slightly lower than the initial estimate of 2.4%. This is also a slight improvement from the first quarter's expansion of 2.0%.Surpassing the 1.09 threshold, the euro gained strength marking its highest point since August 11th. This surge was prompted by data indicating sustained inflationary pressures in Germany and Spain, causing investors to increase their expectations of a forthcoming rate hike by the European Central Bank (ECB). Concurrently, underwhelming US employment and second quarter GDP data exerted downward pressure on the USD. Investors are now closely watching for the upcoming release of Eurozone inflation data on Thursday as well as the US jobs report on Friday, seeking additional insights into potential monetary policy.
Surpassing the 1.27 mark, the pound also showed strength, marking its strongest position since August 24th. This momentum is attributed to market sentiment, which anticipates the Bank of England (BoE) will likely implement two more rate hikes of 25 basis points within the year. Additionally, Ben Broadbent, Deputy Governor of the BoE, indicated that the UK might need to maintain elevated interest rates to address persistent inflationary pressures. Nevertheless, the release of less robust economic data has led to speculation that interest rates could potentially peak at a lower level than initially projected.
Expected Ranges
- EUR/CAD: 1.4722 - 1.4822 ▼
- GBP/CAD: 1.713 - 1.7245 ▲
- AUD/CAD: 0.8756 - 0.8819 ▼
- USD/CAD: 1.3514 - 1.3588 ▼