Home Daily Commentaries USDCAD slips ahead of Fed rate decision

USDCAD slips ahead of Fed rate decision

Daily Currency Update

Demand for the US dollar continued to slip as market participants digested data from last week. On Friday, Flash Service and Manufacturing PMI numbers contracted in July, surprising many analysts to the downside and potentially indicating that the US economy could slip into recession. On Wednesday, the US Federal Reserve is set to announce its latest monetary policy decision, with many market participants anticipating a 75 basis point hike in interest rates. We'll watch Fed Chair Jerome Powell's press conference closely for clues on the future path of monetary tightening. On Thursday, the first reading of second quarter GDP is due. The market is expecting an annualized rate of growth of 0.4%. USDCAD was down 0.44% trading at 1.2858 at the time of writing.

Key Movers

The pound has started the week slightly on the front foot  on Monday off the back of some positive UK data released on Friday. UK retail sales for June and Manufacturing and Services PMI for July all beat estimates adding weight to the argument that the UK economy may still be growing, albeit at a snail’s pace. However, Chris Williamson who is the Chief Business Economist at S&P Global Market Intelligence – which produces the PMI data – did issue a cautionary note that forward looking indicators were not looking good, so the UK economy slipping into recession could still be possible as we head towards 2023. GBPUSD was trading around 1.2037 at the time of writing. The euro benefitted slightly from US dollar softness on Monday following poor German Manufacturing PMI which was released on Friday which came in at 49.2, its first sub-50 reading since June 2020. There is a fear that the Eurozone’s largest economy could also slip into recession, especially should Russian gas supplies be turned off heading into autumn and winter. EURUSD was trading around 1.02177 at the time of writing.

Expected Ranges

  • EUR/CAD: 1.3117 - 1.3212 ▼
  • GBP/CAD: 1.5472 - 1.554 ▼
  • AUD/CAD: 0.891 - 0.8952 ▲
  • USD/CAD: 1.2847 - 1.2943 ▼