USD/CAD found support around 1.3450 ahead of the Bank of Canada’s third consecutive rate cut expected this week, DBS’ Senior FX Strategist Philip Wee notes.
BOC to pause after three consecutive rate cuts
“On September 4, we anticipate the overnight lending rate to fall another 25 bps to 4.25%. CPI core trimmed inflation extended its decline inside the official 1-3% target to 2.7% YoY in July, its lowest level since April 2021.” “On September 6, consensus expects the August unemployment rate to keep rising to 6.5%, its highest level since January 2022. The Trudeau government has moved to protect Canadian jobs by halving the share of low-wage temporary foreign workers that employers can hire to 10% of their overall workforce, effective September 26.”
“However, Canada’s GDP growth surprised by accelerating a third quarter to an annualized 2.1% QoQ saar in 2Q24 vs. the 1.8% consensus; first quarter growth was also revised to 1.8% from 1.7%. Hence, we remain alert to any inclination by the BOC to pause after three consecutive rate cuts.”
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