Skip to content USDCAD Fundamental Analysis – 21-October-2024
The Canadian dollar recently fell to its lowest value since August, dropping below 1.38 against the US dollar. This significant decrease occurred after Canada’s latest Consumer Price Index (CPI) report, which could prompt the Bank of Canada to consider a substantial rate cut of 50 basis points soon.
The USD/CAD 4-hour chart below demonstrates the price, support, and resistance levels.
Inflation Trends in Canada
For September, Canada recorded its lowest annual inflation rate since early 2021, at just 1.6%, below the central bank’s target of 2%. This decline in inflation reflects a potential easing in economic pressure, possibly influencing upcoming monetary policy decisions.
Despite the overall inflation rate drop, the core inflation measures preferred by the Bank of Canada—namely the CPI Median and the CPI Trimmed-Mean—have shown stability. They were reported at 2.3% and 2.4%, respectively, indicating sustained underlying inflation pressures.
Employment Surges
Contrasting with the slowdown in inflation, the Canadian labor market demonstrated robust growth. Surprisingly, it added 46.7K jobs in September, significantly surpassing the anticipated 27K. Additionally, the unemployment rate fell unexpectedly to 6.5%, suggesting resilience in the employment sector.
The Bank of Canada will review its monetary policy on October 23rd. Given the current economic indicators, Governor Tiff Macklem has hinted at the possibility of more aggressive rate cuts if the economic slowdown and inflation reduction continue beyond expectations.
Economic Outlook
This mix of declining inflation and strong job growth presents a complex scenario for Canada’s economy. Analysts suggest that while the job market is thriving, the reduced inflation may signal underlying economic challenges that could influence future fiscal policies.
This delicate balance makes the upcoming Bank of Canada meeting particularly pivotal as it may set the tone for economic strategies in the coming months.
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