The USD/CAD exchange rate saw a slight increase, buoyed by a somewhat hawkish outlook on U.S. monetary policy. The Federal Reserve’s indications of fewer potential rate cuts next year, in light of a decelerating disinflation process, have strengthened the upside potential for this currency pair. On the economic front, the U.S. Consumer Confidence Index recorded a drop of 8.1 points in December, settling at 104.7. In contrast, Canada’s Gross Domestic Product (GDP) showed resilience, growing by 0.3% month-over-month in October, surpassing expectations of a 0.1% decline.
USD/CAD managed to hold on to thin gains after three consecutive days of losses, trading near the 1.4380 mark during the Asian trading session on Tuesday. The mixed economic data from the U.S. added complexity to the monetary policy landscape. Durable Goods Orders for November fell by 1.1%, a larger reduction than the anticipated 0.4%. This came on the heels of an upward revision for October, which showed a revised increase of 0.8%, compared to an earlier report of just 0.2%.
Concerns linger among U.S. households regarding the economic policies of President-elect Trump, particularly fears that proposed tariffs could elevate living costs. These sentiments have been heightened by the Federal Open Market Committee’s latest projections, which suggest fewer rate cuts through 2025 in response to ongoing inflationary challenges.
Meanwhile, Canada experienced a promising GDP growth of 0.3% for October; however, the Raw Material Price Index revealed a 0.5% contraction in November, sharply contrasting with a significant 4.0% increase in October and falling short of forecasts predicting a 0.6% rise. Looking forward, projections suggest a potential contraction in Canada’s GDP of 0.1% for November, which would mark the first monthly decline of the year, aligning with recent warnings from the central bank about downward revisions to growth expectations.
