The USD/CAD currency pair has maintained a positive trajectory, trading above the 1.3950 level, and reaching 1.3975 during the early session on Friday. The US Dollar’s upward momentum is largely influenced by cautious remarks from Federal Reserve officials and ongoing support from certain economic policies. This shift in sentiment has led to a decrease in expectations for a significant rate cut at the Bank of Canada’s upcoming policy meeting on December 11.
The US Dollar continues to gain strength, recently hitting new highs for 2024. Investors are keenly anticipating data releases later in the day, including the flash Purchasing Managers Index (PMI) for both the manufacturing and services sectors, as well as the finalized Michigan Consumer Sentiment index. These indicators are likely to have a substantial impact on trading patterns.
Comments from officials at the Federal Reserve have further bolstered the Dollar’s performance. Specifically, remarks about the potential slowing of rate cuts due to decreasing inflation rates have helped stabilize and even uplift investor confidence in the currency. Additionally, there is growing speculation that proposed economic policies could lead to heightened inflation, which in turn may influence the Fed’s strategy regarding rate adjustments.
Meanwhile, the US Dollar Index, which gauges the Dollar’s strength against a selection of other currencies, is hovering near the 107.00 level, marking a significant peak since November 2023. Market data suggests that futures traders anticipate a 57.8% likelihood of a quarter-point rate cut, a notable decrease from the previous week’s 72.2% chances.
Conversely, expectations surrounding the Bank of Canada have shifted after the release of recent inflation data, which was slightly above forecasts. The likelihood of a 50 basis-points rate cut by the BoC in December now stands at approximately 23%, down from nearly 40% prior to the inflation report, signaling a more cautious approach moving forward.
