USDCAD falls dramatically to 1.3400 level as the US dollar falls, but Canada’s headline the Consumer Price Index climbs.
USDCAD Key Points & Considerations
The USDCAD is under selling stress as the US the dollar falls significantly in advance of the Fed’s policy announcement.
The headline CPI for Canada increased by 0.4 percent, while the yearly CPI increased by four percent.
As long as core inflation stays constant, the Bank of Canada may maintain its present rate of interest stance.
The Canadian CPI data keeps the Bank of Canada on alert.
The Fed will declare interest rates tomorrow.
USDCAD is approaching 1.3371 mark
The CAD got impetus after Canadian CPI indicated increased inflation in both core & headline readings on yearly basis. The rise in the cost of crude oil has served as a big driver to the headline print. The CPI rose in every province, as did housing costs as measured by the rent indicator.
In August, (CPI) increased four percent year on year. reflecting a rise of 3.3% in July. The headline increase was mostly due to increased year-over-year gasoline costs in August (+0.8%) vs July (-12.9 percent). The CPI climbed 4.1 percent in August, mirroring the 4.1 percent increase in July, except petrol.
At the identical time, US construction permit figures revealed some notable gains in comparison to projections. Yet house developments fell dramatically. Whereas such information isn’t likely to have an immediate influence on the Fed. It suggests the possibility of a recession in the housing sector in the US.
Given inflation statistics complimenting recently good job info. Financial markets are already factoring in another rate move (BoC). Moving ahead to the next day, if the Fed message is interpreted as dovish, USDCAD might fall much more. Afterwards, the Bank of Canada’s Kozicki is going to be in the spotlight. which shall be fascinating to watch how he reacts to the new inflation figure.
Furthermore, the (DXY) is on a 2-day dropping streak as the Federal Reserve is likely to forego hiking rates in Sept. The following would be the Fed’s 2nd failure to raise the benchmark rate during its exceptionally severe monetary policy cycle, which began in March of 2022.
According to the CME Group Fedwatch Tool, investors expect interest rates to stay stable at 5.25%-5.50 percent. Following the FOMC meeting on Wed. For the remainder of the calendar year, investors predict that the Fed will maintain its current monetary stance.
Technical Perspective
The daily USDCAD pricing activity indicates a big decrease following the CPI, falling under the respective 50-day & 200-day MA . The most recent swinging bottom of 1.3373 remains in place, Yet, as previously said, a less forceful strategy from Fed- Powell might place the psychological level of 1.3300 underneath danger from CAD bullish traders.
