USDCAD Exchange Rate Has Inflation and Bank Of Canada Ahead

USDCAD will be in focus again with US inflation data and an interest rate decision from the Bank of Canada. 

USDCAD – Daily Chart

USDCAD – Daily Chart

The USDCAD exchange rate found support at the 1.35 level and is now looking for a breakout higher. Resistance is around the 1.38-1.39 levels, and an uptrend support line keeps the higher levels in play. 

The Bank of Canada is expected to keep its benchmark rate on hold this Wednesday. It looks for further inflation before delivering its first interest rate cut in four years. Markets are betting that a rate cut could come as early as June. 

Canadian inflation eased from a peak of 8.1% in June 2022. Friday’s labour force survey also showed further weakness in the job market. However, the central bank risks fuelling another rise in house prices with another rate cut. 

A Reuters poll found that more than 70% of economists expected the BoC to deliver its first rate cut in June, which was in line with market expectations. Seven predicted the first cut would come in July; the remaining four said September. 

“The economy is really quite frail,” said Pedro Antunes, chief economist at Conference Board of Canada. The BoC will announce its monetary policy decision on Tuesday evening, and there will also be a US inflation reading ahead. 

USDCAD will get its guidance for the week following those two announcements. 

Economists expect US inflation to rise from 3.2% to 3.4% in the latest month, adding doubts to the US central bank’s expected rate cut path. 

The US dollar is cooling against other major currencies as investors pull back on their market predictions. 

“The latest developments have increased the risk that the (Federal Reserve) could lag behind other major central banks when lowering interest rates,” currency analysts at MUFG said in their latest research. 

“Another upside inflation surprise could trigger a bigger hawkish reassessment of Fed rate-cut expectations and open the door for the US dollar to break higher,” they added.

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