USD/CAD: Difficult environment for the loonie unless the Fed disappoints markets – Commerzbank

FXStreet Insights Team FXStreet

USD/CAD is nearing the 1.34 level. Economists at Commerzbank expect the Canadian dollar to remain under pressure unless the Federal Reserve disappoints markets.

Bank of Canada’s frontloading seems to be having an effect

“The restrictive monetary policy seems to be having an effect slowly. The economic data of the past months is pointing toward falling economic activity and inflation fell more strongly in August than expected. Not only regarding the overall rate but also for core inflation measures price pressure seems to be falling.”

“The lower inflation rates are not really bad news for the FX market. In particular, it can probably be assumed that the BoC will nonetheless hike its key rate a little bit further. CAD nonetheless eased yesterday. The prospect that key rates in Canada might peak earlier than in the US probably weighed on CAD. Bad market sentiment may have exerted additional depreciation pressure on CAD.”

“The environment is likely to remain difficult for CAD unless the US central bank disappoints the markets today, in which case CAD might enjoy a breather.”

See – Fed Preview: Forecasts from 16 major banks, fast pace hiking cycle continues

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FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

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