USD/CAD extends losses below 1.3700 ahead of the US PMI data
- USD/CAD trades in negative territory for the third consecutive day, around 1.3674.
- The Chicago Fed National Activity Index rose to +0.02 in September vs -0.22 prior.
- Traders await the US S&P Global PMI ahead of the Bank of Canada (BoC) Rate decision on Wednesday.
The USD/CAD pair extends its downside during the Asian session on Tuesday. The downtick of the pair is driven by the correction of the US Dollar (USD) to a one-month low. However, a rise in US Treasury bond yields and the escalating geopolitical tensions in the Middle East might limit the USD’s downside. The pair currently trades near 1.3674, down 0.12% for the day.
The Chicago Fed National Activity Index suggests the US economy is still some distance from a recession. The figure rose to +0.02 in September from the previous reading of -0.22. A zero value for the index indicates the economy is growing in trend.
According to the CME FedWatch Tool, the markets don’t see the probability of a November rate hike, but the odds for January 2024 remain over 30%. The Federal Open Market Committee (FOMC) enters its blackout period. Atlanta Federal Reserve (Fed) President Raphael Bostic said on Friday that he doesn't think that the US central bank will cut the rate before the middle of next year. Fed Philadelphia President Patrick Harker reiterated his preference to keep interest rates unchanged. While Fed Cleveland President Loretta Mester said the US central bank is "at or near the peak of the rate hike cycle.
On the Loonie front, investors await the Bank of Canada (BoC) Interest Rate decision on Wednesday. The market expected the BoC to hold the interest rate unchanged at 5% for the remainder of the year and is expected to cut the rate in the second quarter (Q2) of 2024. Meanwhile, a decline in oil prices might undermine the commodity-linked Loonie as the country is the major oil exporter to the US.
Looking ahead, market participants will keep an eye on the US S&P Global PMI and the Canadian New Housing Price Index for September, which is expected to gain 0.1% in September. On Wednesday, attention will shift to the BoC rate decision and the preliminary estimate of the US Q3 Gross Domestic Product (GDP). The US Core Personal Consumption Expenditure Index (PCE) will be due on Friday.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
