USDCAD – Daily Chart
The price of the USDCAD exchange rate has pushed above 1.40 and will need the data to continue US dollar strength.
The latest data comes on Wednesday but traders are likely to see movement into the end of the week. US consumer prices are expected to tick higher by 0.1% and that would add to dollar strength.
A Bank of Canada interest rate decision will follow for the pair. Traders are expecting to see a 50 basis point cut from 3.75% to 3.25%.
Analysts are expecting the BoC to move ahead of Donald Trump’s tariffs on overseas goods. In June 2024, with inflation at 2.7%, the BoC began dropping its overnight rate. As of now, it’s sitting at 3.75%.
The large cut is not seen as a done deal with some analysts expecting a 0.25%. According to the BMO Canada Economic Outlook released last week, “since June, (BoC) has cut rates by 1.25 per cent, and we expect another cut during their final interest rate meeting in December, as well as a series of cuts through mid-2025. All told, we expect the overnight interest rate to fall from the current 3.75 per cent to 2.5 per cent by the middle of 2025. If anything, the Bank of Canada may be even more aggressive”.
Data released last week showed the jobless rate had climbed to 6.8%, which is the highest since 2021. That led economists at Scotiabank and the Bank of Montreal to join Canada’s four other major lenders in predicting officials will drop the BoC’s overnight lending rate half-a-per-cent.
Prime Minister Justin Trudeau travelled to meet Trump over threats of a blanket 25% tariff on Canadian goods when he takes office in January. Trump said he hopes the pair can “continue our in depth talks on Tariffs and Trade, the results of which will be truly spectacular for all”.
Canada is one of America’s largest trading partners and it sends around 75% of its total exports to the US. The two countries also share deeply integrated supply chains. On Monday, Trudeau told the Halifax Chamber of Commerce that Canada will respond to the tariffs if they go ahead as planned on 20 January.