Early on Monday in Asia, the USD/CAD pair slightly increased and returned to 1.3980. It’s a bit of a stubborn move, especially since Canada just dropped stronger economic numbers. Still, the US Dollar just can’t seem to break out, with traders fully expecting the Federal Reserve to cut interest rates this month. Everyone’s eyes are now on the US ISM Manufacturing PMI coming out later today, hoping for a signal on where things go next.
Fed Rate Cut Expectations Weigh on the Dollar
There’s a growing sense that the Fed is about to lower rates in December, and that’s put real pressure on the Dollar. Soft US data and some pretty dovish talk from Fed officials have fired up bets for a rate cut—CME’s FedWatch Tool shows almost 87% odds of a 25-basis-point move next week. On top of that, rumors are swirling about Kevin Hassett being the top pick for the next Fed chair. He’s seen as a dove and a fan of faster rate cuts, which just adds to the Dollar’s recent weakness. If leadership really does shift in that direction, it probably keeps USD pointed lower, at least for now.
Canadian GDP Surprises, Boosts the Loonie
On the other side, the Canadian Dollar got a lift from some surprisingly strong GDP data. Canada’s economy grew at a 2.6% annualized rate last quarter, bouncing back from contraction and smashing the 0.5% forecast. That’s made traders rethink any aggressive rate cut bets for the Bank of Canada, helping the Loonie hold its ground and stopping USD/CAD from running much higher. With both currencies swayed by shifting rate expectations, there’s bound to be some choppy trading ahead as everyone waits for the next round of US data and the Fed’s December call.
