The USD/CAD pair is losing momentum, trading around 1.3925 during the early European session on Friday. The decline is attributed to a weakening US Dollar (USD), with traders preparing for the highly anticipated US Nonfarm Payrolls (NFP) report for October, which is set to be released later today.
Recent data from the US Commerce Department revealed that the Personal Consumption Expenditures (PCE) Price Index, the Fed‘s preferred inflation measure, rose by 2.1% year-over-year in September, a slight decline from the 2.2% increase recorded in August. This reading aligns with market expectations but highlights a persistent inflationary environment.
While the USD is facing downward pressure, its losses may be limited by uncertainties surrounding the upcoming US presidential election and ongoing geopolitical tensions in the Middle East. Such conditions tend to boost demand for safe-haven currencies like the USD. However, the NFP report could significantly influence market sentiment regarding the Federal Reserve’s interest rate outlook. Any signs of weakness in the US economy or labor market could reignite speculation about a substantial rate cut by the Fed, adding selling pressure on the USD.
On the Canadian front, the outlook for the Loonie (CAD) is also under pressure. Rising expectations that the Bank of Canada (BoC) may implement a larger rate cut in response to signs of economic stagnation could contribute to the CAD’s weakness. Andrew Grantham, a senior economist at CIBC, noted, “With growth once again appearing to fall short of their already downgraded forecast, we continue to forecast that policymakers will deliver another 50 basis points cut at the December meeting.”
As the market anticipates the NFP report, volatility in the USD/CAD pair is expected, with traders closely monitoring the data for potential implications on both currencies.
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