- The Canadian Dollar declined across the board on Friday.
- Canada posted a stronger-than-expected GDP figure for July.
- US PCE inflation data took center stage in Friday's headlines.
The Canadian Dollar (CAD) declined against all major currencies on Friday, losing nearly one-third of a percent against the US Dollar. The markets largely ignored an encouraging Canadian Gross Domestic Product (GDP) growth report, instead focusing on cooling US Personal Consumption Expenditure (PCE) inflation, which is fueling optimism for a potential rate cut.
Canada's GDP rose more than anticipated in July; however, the absence of other significant data led CAD flows to overlook this growth figure in favor of the US PCE inflation report. Headline PCE inflation eased more than expected in August, contributing to a balanced risk appetite.
Daily market movers:
- Canadian GDP grew by 0.2% month-over-month in July, surpassing the anticipated 0.1% and recovering from the previous month's 0.0%.
- Despite the positive GDP growth in Canada, CAD flows remained notably lower on Friday.
- Headline US PCE inflation decreased to 2.2% year-over-year in August, compared to the forecast of 2.3% and down from the previous rate of 2.5%.
- Although headline inflation has decreased, core PCE inflation ticked up to 2.7% year-over-year from 2.6%.
- According to CME’s FedWatch Tool, market expectations for a double rate cut of 50 basis points have risen to 55%.
Canadian Dollar price forecast:
The Canadian Dollar (CAD) is experiencing sideways movement against the US Dollar, with the USD/CAD pair trading within recent highs and lows. The pair is currently in a consolidation phase below the 200-day Exponential Moving Average (EMA).
USD/CAD has rebounded from near-term lows just below the 1.3450 level, but US Dollar bulls are finding it challenging to gain momentum, even after breaking above the 1.3500 mark on Friday.
USD/CAD daily chart
