26 Aug 2024
USD/CAD weakens near 1.3500 as Fed’s Powell signals September interest rate cut
The USD/CAD pair remains under some selling pressure around 1.3510 on Monday during the Asian trading hours. The US Dollar (USD) edges lower after Federal Reserve (Fed) Chair Jerome Powell signalled that time has come for interest rate cuts starting this September.
Most Fed officials delivered dovish messages, supporting the case for rate cuts in September. This, in turn, undermines the Greenback broadly in the precious sessions. Fed’s Powell noted, ”The time has come for policy to adjust.” Powell further stated, “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks.”
Meanwhile, Philadelphia Fed President Patrick Harker emphasized that he supports two or three interest rate cuts in 2024, barring any substantial changes to US economic data. Chicago Fed President Austan Goolsbee stated that monetary policy is currently at its most restrictive level, and the Fed’s focus is now shifting towards achieving its employment mandate. According to the CME FedWatch Tool, traders are now fully priced in a 25 basis points (bps) rate in September, while the odds for a deeper cut stand at 36.5%, up from 24% last week.
Data released by Statistics Canada showed that Canadian Retail Sales declined by 0.3% MoM in June from a fall of 0.8% in the previous reading, in line with the market consensus. Retail Sales excluding automobiles, unexpectedly rose by 0.3% MoM in June, better than the estimation of a decline of 0.2%. Market players will keep an eye on the Canadian Gross Domestic Product (GDP) for the second quarter on Friday. Meanwhile, the Bank of Canada (BoC) is expected to cut an additional 75 basis points (bps) by year-end.
