- The Canadian dollar weakened on Tuesday, but the U.S. dollar fell faster.
- There is still little data available for Canada until the GDP is released on Friday.
- Markets remain quiet until US PCE inflation figures are released on Friday.
The Canadian dollar (CAD) traded broadly weaker on Tuesday, declining against most of its major currencies, but still had room to move higher against the U.S. dollar (USD). The greenback weakened across the board midweek, slipping into negative territory and contributing to USD/CAD remaining in negative territory for the third consecutive day.
Canada remains largely absent from the economic calendar this week until the release of second-quarter gross domestic product (GDP). Annualized second-quarter GDP is expected to decline to 1.6% from 1.7%, but markets will likely be entirely focused on the U.S. Personal Consumption Expenditure – Price Index (PCE), which is due to be released in the same release window.
Daily overview of market drivers
- Markets continue to sell the greenback to death as expectations for a rate cut remain high.
- The CAD continues to struggle to develop its own momentum and remains at the mercy of general market trends.
- The fact that the US Federal Reserve (Fed) is taking a more dovish stance continues to be the talk of the town.
- According to the CME’s FedWatch tool, 35% of interest rate markets are calculating a probability of 50 basis points for September 18, while the rest are expecting a cut of a quarter of a percentage point.
- Interest rate traders expect a total reduction of 100 basis points by the end of the year.
Price forecast for the Canadian dollar
Despite the Canadian dollar’s (CAD) uncertain tone on Tuesday, a generally weakening U.S. dollar has pushed USD/CAD lower, extending a decline below 1.3500 and testing six-month lows at 1.3450. The pair has been down on all but four of the last 17 consecutive trading days, falling 3.5% from its early August peak near 1.3950.
A one-sided bearish breakdown in USD/CAD chart action has seen bids fall right through the 200-day exponential moving average (EMA) at 1.3628. Bulls holding off are running out of room to gain a foothold before momentum breaks the lower end of the congestion zone between 1.3600 and 1.3400 in early 2024.
USD/CAD daily chart
Economic indicator
Gross domestic product annualized
Gross domestic product (GDP), released monthly and quarterly by Statistics Canada, is a measure of the total value of all goods and services produced in Canada during a given period. GDP is considered the main measure of Canada’s economic activity. Data is expressed on an annual basis, meaning that the rate has been adjusted to reflect the amount by which GDP would have changed over the course of a year if it had continued to grow at that particular rate. Generally, a high reading is considered bullish for the Canadian dollar (CAD), while a low reading is considered bearish.
Read more.
Next version: Fri., 30 August 2024, 12:30
Frequency: Quarterly
Consensus: 1.6%
Previous: 1.7%
Source: Statistics Canada
