The Canadian Dollar (CAD) remained subdued on Friday, overshadowed by broader market sentiments revolving around diminishing expectations for a Federal Reserve (Fed) rate cut. The release of the US Personal Consumption Expenditure (PCE) Price Index figures, which surpassed expectations, further dampened prospects for rate reductions.
Canada’s economic calendar remains relatively quiet until next Tuesday’s Gross Domestic Product (GDP) data release. However, market attention is predominantly focused on the Fed’s upcoming rate decision scheduled for next Wednesday. Additionally, investors are eagerly anticipating the release of the Nonfarm Payrolls (NFP) report next week, searching for indications of a potential slowdown in the US economy that could prompt rate adjustments.
Key Market Highlights:
US PCE inflation indicators maintained their strength in March, with the Core US PCE Price Index matching expectations at a steady 0.3%.
The year-over-year (YoY) Core PCE Price Index also held firm at 2.8%, surpassing the forecast of 2.6%.
Annualized headline PCE Price Index for the year ending in March exceeded expectations, reaching 2.7% compared to the anticipated 2.6%, showing acceleration from the previous 2.5%.
Persistently high inflation rates are diminishing hopes for a rate cut in September.
According to the CME’s FedWatch Tool, rate markets are only pricing in a 60% probability of a September Fed rate reduction, reflecting fading expectations.
The Canadian Dollar‘s performance was largely subdued amidst prevailing uncertainty surrounding the Fed’s monetary policy stance, compounded by robust US inflation data. With market sentiments heavily influenced by these factors, the Canadian Dollar awaits further cues from upcoming economic indicators and central bank decisions.
