Canadian Dollar weakens further after outsized BoC rate cut

The Canadian Dollar shed a further fifth of a percent against the Greenback.
The Bank of Canada delivered a widely-expected 50 bps rate trim on Wednesday.
Rate markets see a decent chance of a further 50 bps BoC rate cut in December.

Joshua Gibson FXStreet

The Canadian Dollar (CAD) receded on Wednesday, backsliding another 0.2% against the US Dollar after the Bank of Canada (BoC) delivered a widely expected 50 bps rate cut. Rate traders are already pricing in a further double rate cut in December as the BoC grapples with Canada’s rapidly deflating economic landscape.

Canada continues to see the downside opening up in economic data prints, spurring the BoC to step up the pace of rate cuts heading into the end of the year. Canadian Retail Sales figures from August are slated to print on Friday, and are expected to stick to the trend and moderate further. However, the long-dated data is unlikely to spark much movement.

Daily digest market movers

BoC cuts interest rates by 50 bps, meeting broad-market expectations.
Canada’s main interest rate peaked at 5.0% in July 2023.
Crumbling economic data and inflation prints have spurred the BoC to slash rates down to 3.75% overall.
Rate swap markets see 25% odds of a follow-up 50 bps rate cut from the BoC in December.
According to the BoC’s latest Monetary Policy Report, the Canadian central bank expects headline inflation figures to remain close to target levels for the foreseeably future despite delivering a total of five rate cuts through 2024.

Canadian Dollar price forecast

Momentum continues to drag the Canadian Dollar (CAD) lower, with the Loonie finding a fresh 11-week low against the Greenback on Wednesday. USD bulls are on pace to chalk in a fourth straight winning week against the CAD, and the USD/CAD chart is set to rechallenge the 1.3900 handle in the coming days.

It’s getting difficult for technical traders to ignore a long-run spiral baked into USD/CAD weekly candlesticks. The pair has ground out chart paper in a sideways channel since late 2022, with price action bouncing sharply between the 1.3900 and 1.3300 levels. Despite the Greenback’s recent hot streak against the Loonie, USD/CAD could be poised for a fresh tilt into the bearish side if bids can’t pierce into fresh multi-year highs above 1.4000 in the next few weeks.

USD/CAD daily chart

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.

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10

Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.

Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

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