USD CAD Forex Analysis - Baxia Markets

USDCAD +0.71%

The USD continues gaining ground across most Forex major pairs after the US released the Job Openings and Labor Turnover Survey (JOLTS) economic indicator earlier in the session; surprisingly, the result came out much better than expected with 11.239M, surpassing the previous of 11.04M; while analysts anticipated a 10.45M.

The US labor market continues to be very strong and holding the US economy afloat; we could start seeing a decline in the medium term as monetary policy is expected to be tighter in the upcoming weeks. The Fed will announce an interest rate decision later in September; analysts anticipate more hikes to the rate in an effort to restore price stability.

Canada will release high-impact economic indicators during the following trading sessions, which will impact the exchange rate of USDCAD; they will announce GDP Growth Rate QoQ and GDP Growth Rate Annualized. The first one is expected to come out at 1%; the previous figure was 0.8%. Experts also anticipate an increase in the annualized GDP growth rate of 4.4%, while the previous was 3.1%. The CAD could benefit if the figures come out higher than expected, as it will show that Canadian economic activity is still high.

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USDCAD -0.24%

The Canadian dollar recovered some ground against the US dollar after the Bank of Canada released an Interest Rate Decision; they hiked the rate to 3.25%, a 75 basis points increase from the previous figure of 2.5% in July.

Experts anticipated this rate hike as an effort from the Canadian Central Bank to control inflationary pressures, which was 7.6% in July. We are starting to see Inflation give in; however, this is mainly attributed to the lower price of energy commodities. Most Central Banks are expected to continue hiking rates until Inflation is under control, which is likely to cause a global slowdown in economic activity in the medium term.

The US is scheduled to release high-impact economic indicators during the next trading session, which will likely impact the exchange rate of USDCAD. Initial Jobless Claims are expected to come out at 240K, a 7K increase from the previous figure.

A result higher than 240K will weaken the USD as it relies heavily on its labor market to maintain solid economic activity. We have seen very good labor market numbers in the past that we were not expecting; we wouldn't be surprised if these numbers continue to improve. On the other hand, a figure lower than 240K will strengthen the USD across most Major Forex pairs.

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USDCAD +0.52%

The US dollar is up against the loonie after Oil lost ground to the USD; just six sessions ago, the commodity reached its lowest level since the beginning of the year. Canada relies heavily on the export of commodities; lower Oil prices affect the value of USDCAD.

The US released high-impact economic indicators earlier in the session. The US retail sales expert consensus was at 9%; the result was slightly higher at 9.1%, strengthening the USD.

The US also released Initial Jobless Claims this morning; the result came out better than expected and better than the previous week’s figure (218K). The consensus was 226K, while the actual number was 213K.

The US labor market has been one of the columns holding the US economy despite the efforts from the Federal Reserve to slow down economic activity to control inflation. The Fed is expected to continue hiking interest rates aggressively to restore price stability.

Next week, Canada will release high-impact economic indicators that will bring high volatility to the CAD exchange rate against its major currency counterparts. On Tuesday, Canada will release the Inflation Rate; the expert consensus is at 7.5%, a slight decrease from the previous 7.6%.

On Friday, Canada will release Retail Sales, which are expected to have a significant drop from 11% to 3.5%; this means that the Canadian economic activity is slowing down at a high rate, and the Bank of Canada could see this as a favorable scenario to maintain the interest rate at 3.25% at the October Interest rate decision.

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USDCAD +0.86%

After Canada released the Consumer Price Index, the US dollar resumed the rally against the loonie; initial data came out at 4.8% for August, short of the expert consensus at 5.1%, suggesting that Canadian economic activity is settling. The lower CPI is mainly attributed to lower cost in fuel prices.

The Bank of Canada has been hiking the interest rates aggressively and is now starting to impact the country's inflation rate, which was announced earlier this session. The result came out lower than expected at 7%, while analysts anticipated a 7.3%. The BoC is expected to continue hiking the interest rate in order to restore price stability; expert consensus indicates that the next hike could be 50 basis points.

Tomorrow morning, the US Federal Reserve will announce an Interest Rate Decision; experts believe the hike will be 75 basis points, while others believe that the Fed will be more aggressive on this hike and raise interest rates by 100 bps, which will affect the exchange rate if USDCAD.

Central Banks around the world are taking aggressive measures to control inflation; however, economic activity does not seem to slow down at the rate they anticipated, pushing them to take further action.


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