Skip to content USDCAD Fundamental Analysis – May-28-2024
USD/CAD—The Canadian dollar has gained strength, reaching 1.36 per USD after hitting a low of 1.373 USD on May 23rd. This rebound is attributed to a weakening US dollar and rising oil prices, which have increased the appeal of the loonie due to anticipated foreign currency inflows.
USDCAD Fundamental Analysis – May-28-2024
Despite this recovery, recent inflation data suggests that the Bank of Canada (BoC) might consider cutting interest rates next month. April’s headline inflation rate dropped to 2.7%, the lowest in three years, while the core inflation rate fell to 1.6%, its lowest since 2021.
Interest rate futures indicate that approximately half of the market anticipates a BoC rate cut in June, which could limit further support for the Canadian dollar. Investors also monitor upcoming GDP figures, expected to show economic growth. These data points will be crucial in determining the BoC’s next steps.
Meanwhile, the US Federal Reserve’s recent minutes revealed ongoing concerns about persistent inflation in the US economy. Some Federal Open Market Committee members are prepared to implement additional monetary tightening measures if necessary. (Source Bloomberg)
BoC Rate Cuts Impact on the Canadian Dollar
In summary, while the Canadian dollar benefits from current market conditions, the potential for a BoC rate cut and upcoming economic data will significantly shape its future trajectory. Stay informed to make well-rounded financial decisions in this dynamic economic environment.
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