- USD/CAD falls 0.57% below its opening price as the Fed pivot story weakens the US dollar.
- The bad data on housing in the US and the deterioration of consumer confidence, winds against the dollar, justify the pivot of the Fed.
- TD Securities Securities estimates that the Bank of Canada (BOC) will raise rates by 75 basis points on Wednesday.
The USD/CAD retreats in the North American session, as the dollar weakens due to the slowdown in the pace of tightening by the Federal Reserve, while unfavorable economic data from the US were headwinds for the dollar. Additionally, US companies reporting better-than-expected earnings maintain risk appetite. At the time of writing, the USD/CAD is trading at 1.3613, below its opening price, having reached a high of 1.3734.
Canadian dollar appreciates on BOC decision
The narrative of the financial markets changed since last Friday when it became known that the Federal Reserve could slow down the pace of increases in interest rates, also clarified by the president of the San Francisco Fed, Mary Daly, and the president of the Fed of St. Louis, James Bullard, both stating that 75 basis points would not be the norm. At the same time, Bullard added that it would be discussed at the Federal Reserve Open Market Committee (FOMC) in November.
In terms of data, the US docket included housing data, which added to the ongoing economic slowdown in the US. House prices in August rose 13%, down from 15.6% in July, as reported by S&P CoreLogic Case Shiller. For its part, the Federal Housing Financing Agency (FHFA) has published that housing prices in August increased by 11.9% year-on-year, below the 13.9% in July.
For its part, the Conference Board (CB) Consumer Confidence fell to 102.5, below estimates of 105.9, mainly due to growing concerns about inflation and a possible recession in 2023.
Lynn Franco, Senior Director of Economic Indicators at The Conference Board, commented that consumers plan to buy a home in the next six months, even though borrowing costs are rising. She added that “inflationary pressures will continue to pose strong headwinds to consumer confidence and spending, which could lead to a difficult holiday season for retailers.”
Other than this, the Canadian calendar is empty ahead of Wednesday’s Bank of Canada (BoC) monetary policy decision. Analysts at TD Securities said they expect the BOC to rise 75 basis points in October and another 25 basis points in December and see BOC rates peaking around 4.25%.
USD/CAD Key Technical Levels
Source: Fx Street
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