Skip to content USDCAD Fundamental Analysis – 26-June-2024
The Canadian dollar has recently seen a modest increase, reaching 1.365 against the USD, its highest mark since June 3rd. This followed an unexpected uptick in Canada’s inflation rates.
Canadian inflation Rises to 2.9%
The headline and core inflation rates rose to 2.9% and 1.8%, respectively, primarily driven by service costs. Due to this inflationary spike, the Bank of Canada will likely approach future rate cuts more cautiously. At the beginning of the month, the central bank reduced its principal interest rate by 25 basis points to 4.75%, mentioning the possibility of further reductions if the expected slowdown in inflation materializes.
USDCAD Fundamental Analysis – 26-June-2024
Recent data on inflation in Canada, leading to a strengthened Canadian dollar, could also impact the USD/CAD pair, especially considering the global context of monetary policy shifts.
As the Bank of Canada hints at cautious future rate cuts due to rising inflation, it suggests a shifting dynamic in interest rate differentials affecting currency valuations. Typically, when a country like Canada indicates a slowdown in rate cuts, it makes its currency more attractive relative to others whose central banks continue aggressive rate reductions.
For the USD/CAD, this means potential downward pressure on the USD if the U.S. Federal Reserve continues or intensifies its rate cuts. The USD might weaken against currencies like the Swiss Franc, often perceived as a haven during economic uncertainty and shifting monetary policies.
Investors should closely monitor these developments as shifts in inflation and interest rate policies in major economies can drive significant movements in forex pairs like USD/CAD.
About The Author
Comments are closed.