USD/CAD moves higher to near 1.3750 with focus on BoC monetary policy
|- USD/CAD gains to near 1.3750 with BoC policy in focus.
- The Canadian Dollar weakens due to multiple headwinds.
- The US Dollar edges lower ahead of a busy US data week.
The USD/CAD pair rises to near 1.3750 in Monday’s European after recovering its intraday losses. The Loonie asset strengthens as the Canadian Dollar weakens due to a sharp correction in oil prices and uncertainty ahead of the Bank of Canada’s (BoC) interest-rate policy, scheduled for Wednesday.
West Texas Intermediate (WTI), futures on NYMEX, declines to near $78.30, amid uncertainty over China’s economic outlook. Investors worry that the Chinese economy struggles for a firm-footing due to weak domestic demand. The economy grew at a slower-than-expected pace in the second quarter this year.
It is worth noting that Canada is the leading supplier of Oil to the United States (US) and higher Oil prices support the Canadian Dollar.
On the monetary policy front, investors expect that the BoC will deliver subsequent rate cuts on Wednesday. The BoC is expected to cut interest rates again by 25 basis points (bps) to 4.5% due to easing price pressures and cooling labor market conditions.
Meanwhile, the US Dollar (USD) has corrected gradually as the withdrawal of the re-election bid by US President Joe Biden has induced political uncertainty. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slides to near 104.20.
This week, the US Dollar will be guided by a slew of US economic data, which will provide cues about when the Federal Reserve (Fed) will start lowering interest rates this year.
Economic Indicator
BoC Interest Rate Decision
The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.
Read more.Next release: Wed Jul 24, 2024 13:45
Frequency: Irregular
Consensus: 4.5%
Previous: 4.75%
Source: Bank of Canada
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