The USD/CAD currency pair is currently trading at approximately 1.3490 during the early hours of the Asian session on Friday, reflecting a modest uptick. This movement can be attributed to recent economic data from the United States indicating stronger-than-expected growth, which has provided a boost to the US dollar.
The US Bureau of Economic Analysis reported that the second estimate for Gross Domestic Product (GDP) in the second quarter of 2024 came in at an annualized growth rate of 3.0%, outperforming the previous estimate of 2.8% and surpassing market expectations. Additionally, weekly Initial Jobless Claims fell slightly, decreasing to 231,000, which is below analysts’ predictions. These indicators contribute to a more robust outlook for the US economy and bolstered the dollar above the critical 101.00 level.
In light of these developments, remarks from influential Federal Reserve officials have sparked discussions regarding potential interest rate moves. Notably, a leading member of the Federal Open Market Committee suggested that it may be time to consider rate cuts, citing easing inflation and higher unemployment rates. However, he expressed the need for further confirmation from upcoming employment and inflation reports prior to any policy decisions.
Attention is now focused on the upcoming release of the Personal Consumption Expenditure (PCE) Price Index for July, which may offer insights into future interest rate policies. A weaker PCE reading could prompt the Committee to initiate a rate-cutting cycle, potentially exerting downward pressure on the dollar.
On the Canadian dollar front, an increase in crude oil prices, which can positively influence the currency due to Canada’s position as a leading oil exporter, could provide some support. Nonetheless, expectations remain that the Bank of Canada will implement additional interest rate cuts next week, driven by ongoing economic challenges and rising unemployment, which may diminish the Loonie’s strength against the USD.
