USD/CAD price holds above 1.4400 as market awaits key data
USD/CAD trades near 1.4405, supported by Fed’s hawkish stance
The USD/CAD pair maintained positive momentum, trading near 1.4405 during early Friday’s Asian session, driven by a robust US Dollar. The Federal Reserve's recent decision to lower interest rates by 25 basis points to a target range of 4.25% to 4.50% reinforced the Greenback's strength.
The Federal Reserve’s revised "dot plot" now projects only two 0.25% rate cuts in 2025, a notably hawkish shift compared to prior expectations of four cuts. This development has boosted the US Dollar broadly, with investors interpreting the Fed’s stance as a sign of confidence in the US economy’s resilience.
The upcoming release of the US Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, will be closely watched for further clues on monetary policy direction.
USD/CAD chart (Nov 2024 - Dec 2024) Source: Trading View
Canadian Dollar weighed by slowing inflation
The Canadian Dollar faced headwinds as November’s Consumer Price Index (CPI) inflation fell unexpectedly, adding to expectations of modest rate cuts by the Bank of Canada (BoC) in 2025. Headline CPI eased to 1.9% year-over-year, while core inflation metrics revealed lingering stickiness. Analysts, including Rachel Siu from BlackRock, forecast a 25-basis-point rate cut by the BoC in January, followed by a gradual approach to easing through 2025.
These factors have tilted the scales in favor of USD/CAD, with the pair finding support amid a mixed Canadian inflation outlook and the Fed’s hawkish messaging. Canadian October Retail Sales data, set to be released later today, could influence market sentiment further.
USD/CAD traders will monitor data releases from both economies for near-term direction. While the Fed's hawkish stance bolsters the USD, Canada’s inflation slowdown creates a bearish backdrop for the CAD. A breakout above 1.4450 could signal further gains for USD/CAD, while support near 1.4350 may limit downward corrections.
In our earlier coverage, we highlighted USD/CAD’s rally to multi-year highs, driven by dovish BoC signals and US inflation data. These factors remain pivotal in shaping the pair’s outlook.
