- USD/CAD drops below 1.3550 as BoC cuts interest rates by 25 bps to 4.25% as expected.
- The US Dollar corrects sharply following weak US JOLTS job openings data for July.
- Investors are looking to the US NFP in August for further guidance on interest rates.
The USD/CAD pair fell sharply below the crucial support of 1.3550 as the Bank of Canada (BoC) cut its key interest rates by 25 basis points (bps) for the third consecutive time, taking them to 4.25%.
The BoC was widely anticipated to cut interest rates, which did not lead to the Canadian Dollar (CAD) weakening further. Investors were expecting a dovish interest rate decision as inflationary pressures in the Canadian economy have been significantly contained. Moreover, the economy needs a liquidity boost to improve weakening growth prospects.
Meanwhile, the US Dollar (USD) fell sharply on weak US JOLTS job openings data for July. The report showed that job openings came in at 7.673 million, much lower than estimates of 8.1 million and the previous release of 7.91 million, revised down from 8.184 million. The weak job openings data has raised downside risks for the US labor market. The Dollar Index (DXY), which tracks the value of the Dollar against six major currencies, fell below 101.40.
The US dollar corrected on Tuesday following the release of weak US ISM manufacturing PMI for August, raising expectations that the Federal Reserve (Fed) could begin the process of aggressive policy easing, which is expected this month.
The ISM agency reported that manufacturing activities contracted at a faster pace than projected, with the PMI coming in at 47.2 versus estimates of 47.5.
According to the CME FedWatch tool, the probability of a 50 basis point (bps) interest rate cut in September is 39%, while the rest favor a 25 bps decrease to 5.00%-5.25%, indicating that rate cuts this month have already been fully discounted by traders.
This week, the main trigger for the US Dollar will be the US Non-Farm Payrolls (NFP) data for August, due out on Friday. Investors will pay close attention to the official labor market data as the Fed is now more concerned with preventing job losses.
Related news
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BoC Governor Macklem leaves door open for further easing
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US JOLTS job openings fall to 7.67 million in July vs. 8.1 million expected
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What is NFP and how does it affect the Forex market?
Source: Fx Street

I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.