USDCAD Fundamental Analysis – May-30-2024

USD/CAD—The Canadian dollar has recently weakened, falling beyond 1.37 per USD. This brings it to the month’s low of 1.373, observed on May 23rd. The primary attribute to this decline is the strength of the US dollar.

USDCAD Fundamental Analysis – May-30-2024

Hawkish remarks from Minneapolis Fed President Kashkari have played a significant role in this shift. He suggested that the Federal Reserve might raise interest rates if inflation continues to be a problem. This strengthened the US dollar, impacting the Canadian dollar negatively.

Despite some expectations for the Bank of Canada (BoC) to take a hawkish stance, the US dollar’s strength outweighed these expectations. The recent rise in producer prices in Canada has raised concerns that Canadian inflation might follow the same trend as in the US and remain high.

Canadian producer prices jumped by 1.5% in April from the previous month. They owed a 0.9% increase in March and nearly doubled the expected rise of 0.8% in April; this significantly increased almost all market expectations regarding the BoC’s actions.

Interest rate futures now show that only 31% of the market expects a rate cut from the BoC in their June meeting, down from over 55% the previous week. This shift reflects growing uncertainty and concern over inflation trends.

Conclusion

In conclusion, a stronger US dollar combined with rising Canadian producer prices strengthens the Canadian dollar. This situation highlights the importance of closely monitoring economic indicators and central bank signals to make informed financial decisions.

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