- The Canadian dollar is falling as a result of concerns expressed during the morning session in the United States regarding increased risk and uncertainty.
- Despite the fact that Canada’s GDP is lower than anticipated, the Canadian dollar continues to lose value.
- Wage growth in the United States has picked up once more, which dampens hopes for a rate cut.
As a result of a risk-off sentiment in the American market, which was triggered by higher-than-expected employment levels in the United States, the Canadian Dollar (CAD) experienced a decline in value against the Greenback on Tuesday. The upcoming rate announcement from the Federal Reserve (Fed) of the United States is scheduled to take place on Wednesday, and investors are getting ready for it.
During February, Canada’s Gross Domestic Product (GDP) data continued to show a downward trend, further hampered the value of the Canadian Dollar. Another day of fluctuating trading for the Canadian Dollar was brought about by the declines in the Antipodean markets, which resulted in the Canadian Dollar receiving a boost in Pacific markets.
The Canadian Dollar Is Falling as a result of the Rise in the Greenback
- Canada’s month-over-month gross domestic product (GDP) increased by 0.2% in February, slightly lower than the expected increase of 0.3% and a decrease from January’s revised decline of 0.5% (which was initially reported as 0.6%).
- With a notable acceleration, the Employment Cost Index for the first quarter of the year in the United States reached 1.2%, surpassing both the forecasted 1.0% and the 0.9% wage growth from the previous quarter.
- The persistent increase in labor costs continues to cause problems for markets eager for interest rate cuts. This is because inflation continues to be higher than the targets set by the Federal Reserve, and efforts to curb price growth have come to a halt.
- With a reading of 37.9, the Chicago Purchasing Managers Index (PMI) for April marked the lowest reading for the indicator since November 2022.
- The Consumer Board’s Consumer Confidence Index dropped to 97.0, reaching a level that hasn’t been seen in almost two years, based on the collective feedback from consumer surveys.
- The US ADP Employment Change for April is scheduled to be released on Wednesday, with expectations of a slight decrease to 179K from the previous figure of 184K.
- The Federal Reserve’s upcoming interest rate decision and Monetary Policy Statement are set to be released at 18:00 GMT on Wednesday. Fed Chair Jerome Powell is scheduled to conduct a press conference half an hour later.
- Despite the fact that market participants will eagerly await any indications from the Federal Reserve regarding potential future rate reductions, it is anticipated that the Federal Reserve will keep interest rates at their current level.
- The FedWatch Tool provided by CME indicates that the possibility of a rate cut occurring in September has been eliminated, and the rate markets are currently indicating that there is a 51.1% chance that there will be no rate cut until the meeting that takes place in November.
Canadian Dollar Softens in Response to Risk-off Greenback Bids
On Tuesday, the US Dollar (USD) and the Euro (EUR) declined 0.6% and 0.3%, respectively, against the Canadian Dollar (CAD). Overall, the Canadian Dollar experienced a mixed performance. Its value has increased by approximately 0.5% compared to the currencies of Australia and New Zealand, while it has experienced a slight increase of 0.1% compared to the Japanese yen.
Throughout the US market session on Tuesday, the USD/CAD pair reached a new high, surpassing a previous high that had not been seen in the last five days. A vital resistance area that ranged from 1.3680 to 1.3630 was overcome by a rebound that brought the price back up to the 1.3750 level. The price has not yet recovered from its previous peak at 1.3845; however, there is a resurgence of buyers as they reclaim positions above the 200-hour Exponential Moving Average (EMA) at 1.3688. This indicates that buyers are regaining their positions.
