The Canadian Dollar (CAD) experienced a decline against most major currencies on Friday as investors turned their focus on US inflation figures, waiting to see if the Federal Reserve will deliver a rate trim in September. With two quarter-point rate cuts from the Bank of Canada this year, CAD traders are anticipating more meaningful Canadian economic data in the coming weeks, with Canadian inflation data expected later in August.
Despite continued uncertainties, investors are undeterred and are still expecting a 100% chance of a September rate cut from the Fed. The US Personal Consumption Expenditures Price Index (PCE) inflation figures failed to meet expectations, but core US PCE inflation remained strong, impacting market sentiment. The upcoming week will see mid-tier Canadian Gross Domestic Product (GDP) data and US Nonfarm Payrolls (NFP) figures, which are expected to ease lower.
On the technical side, the Canadian Dollar struggled to find momentum on Friday, declining against the Euro and Pound Sterling while holding steady against the Greenback. USD/CAD is set to close a second straight week in the green, with intraday price action hovering near the top end of a supply zone. Near-term technical levels suggest potential resistance turned support around 1.3750, with a bearish pullback facing the 50-day EMA rising into 1.3700.
Factors influencing the Canadian Dollar include interest rates set by the Bank of Canada, the price of Oil, the health of the Canadian economy, inflation, and the Trade Balance. Higher interest rates from the BoC and rising Oil prices tend to be positive for the CAD, while strong economic indicators and market sentiment can also impact the currency. Inflation plays a complex role, as in modern times, higher inflation can actually attract capital inflows and increase demand for the Canadian Dollar.
Overall, the Canadian Dollar remains influenced by a variety of factors, and market sentiment is currently focused on US inflation data and potential Fed rate cuts. While CAD traders await more significant Canadian economic data, the currency continues to navigate through global market uncertainties. As traders assess upcoming data releases and market developments, the Canadian Dollar’s performance against major currencies will be closely monitored for further trends and movements in the forex market.
