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by The Canadian dollar has strengthened, reaching $1.351 (USD/CAD). This rise is close to the five-month peak of 1.344 on August 27th. Investors closely watch the currency’s movement, influenced by the latest Bank of Canada (BoC) decision regarding interest rates.
USDCAD Fundamental Analysis – 5-September-2024
Bank of Canada Lowers Interest Rates to Ease Economic Concerns
In its recent announcement, the BoC reduced interest rates by 25 basis points, a move that was expected by many. The decision comes as the Canadian economy faces growing challenges, including inflation, gradually moving closer to the bank’s target of 2%.
This rate cut is part of a more significant effort to support economic growth and manage inflation effectively.
Economic Growth Slows in the Third Quarter
Preliminary reports suggest that the country’s economic growth in the third quarter might fall short of the Bank’s July forecast. As the economy slows, concerns about stagnation in key areas like the labor market are also rising.
The unemployment rate remains steady at 6.4%, indicating that future meetings could discuss more economic measures, such as further rate cuts.
Housing and Service Sectors Keep Inflation High
Despite the slowdown in growth, some areas of the economy, such as the housing market and specific service industries, continue to face intense price pressures. According to BoC Governor Tiff Macklem, these sectors keep inflation higher than expected.
This continued inflation pressure suggests the central bank may take a more cautious approach in its future decisions, which could further boost the Canadian dollar.
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