Skip to content USDCAD Fundamental Analysis – 4-October-2024
In October, the Canadian dollar, often referred to as the “loonie,” dipped beyond 1.35 against the U.S. dollar, marking its weakest point in a week. This decline was primarily triggered by disappointing economic reports that led to expectations of further monetary policy easing.
The USD/CAD 4-hour chart below shows the price as of this writing.
Economic Indicators Point to Challenges
Recent data paint a concerning picture of Canada’s economic health. The S&P Global Canada Composite Purchasing Managers’ Index (PMI) decreased from 47.8 in August to 47.0 in September. This marked the fourth consecutive month of worsening conditions in the private sector, indicating ongoing contraction.
The situation looks gloomy in the services sector, where the Services PMI plummeted to 46.4, its most rapid decline since March, underscoring a continued downturn.
U.S. Dollar Rises Amid Global Uncertainty
Concurrently, the U.S. dollar saw a significant upswing, reaching a six-week peak. This rise was fueled by robust economic reports from the U.S. and an increased demand for safe-haven assets.
Investors are growing cautious due to the escalating conflicts in the Middle East, which has led to a flight towards more stable investments, adding pressure to the Canadian dollar.
Conclusion: Economic Crosswinds Affect Currency
The Canadian dollar’s recent weakness can be attributed to deteriorating domestic economic conditions and a strengthening U.S. dollar, driven by global uncertainties and strong U.S. economic performance.
This situation highlights the interconnected nature of global economies and the swift impact that shifts in economic policy and world events can have on currency values.
As Canada faces continued economic challenges, the path forward will likely involve careful monitoring and possibly more adjustments to monetary policy.
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