Canadian dollar gains ground after BoC cut

September 5, 2024 Share Print 0

The Canadian dollar is almost unchanged on Wednesday. In the North American session, USD/CAD is trading at 1.3507 at the time of writing, down 0.02%. A day earlier, the Canadian dollar rose 0.34% in the aftermath of the Bank of Canada rate cut.

BoC trims interest rate to 4.25%

There were no surprises as the Bank of Canada delivered another rate cut on Wednesday, the third in as many meetings. This brings down the key interest rate to 4.25%, its lowest level since December 2022. The move was expected by the markets and the Canadian dollar responded with slight gains.

BoC Governor Macklem sounded optimistic about further rate cuts, saying at his press conference that if inflation continues to ease as expected, “it is reasonable to expect further cuts”. There has been some speculation about larger cuts and Macklem acknowledged that a 50-basis point cut was a possibility if inflation became “significantly weaker than expected”, adding that rate decisions would be data-dependent.

The tough battle against inflation has largely been won, as inflation has been within the BoC’s target band of 1% to 3% for seven straight months. Inflation eased in July to 2.5%, down from 2.7% in June. The central bank wants to see inflation dip to 2% but has moved ahead with its rate-cutting cycle regardless.

The US and Canada will release the August employment reports on Friday, which could mean strong movement from the Canadian dollar. The US nonfarm payrolls release will be closely watched by the Federal Reserve which is set to cut rates on Sept. 18. A strong figure will likely cement a quarter-cut point, while a soft reading will support the case for an oversize half-point cut.

USD/CAD Technical

1.3523 is a weak resistance line. Above, there is resistance at 1.3546
1.3481 and 1.3458 are the next support levels

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Kenny Fisher

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A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.