USD/CAD price stays below 1.44 amid weaker U.S. dollar and lower yields
USD/CAD hovers near 1.4395 with limited upside potential
The USD/CAD pair traded slightly lower, hovering near 1.4395 during Friday’s early Asian session, as the U.S. dollar faced pressure from weaker retail sales data and declining Treasury yields. U.S. retail sales rose by 0.4% month-over-month in December, reaching $729.2 billion, but fell short of market expectations of 0.6% and significantly lagged the previous revised figure of 0.8%.
The softer data has heightened concerns about slowing consumer spending in the world’s largest economy, weighing on the Greenback. However, downside risks for the U.S. dollar remain limited as the Federal Reserve (Fed) adopts a cautious approach to interest rate cuts. Policymakers are expected to ease monetary policy gradually, balancing economic support with inflation concerns.
USD/CAD price analysis (Nov 2024 - Jan 2025) Source: TradingView.
Bank of Canada’s quantitative tightening update
The Canadian dollar (CAD) finds support from the Bank of Canada’s (BoC) recent announcement that its quantitative tightening program will conclude in the first half of 2025. Deputy Governor Toni Gravelle clarified that the BoC has no plans for a near-term shift to quantitative easing, a move aimed at stabilizing market conditions. This development has provided mild strength to the Loonie, keeping the USD/CAD pair under pressure.
Market participants are also closely monitoring potential trade policy shifts under U.S. President-elect Donald Trump, which could impact U.S.-Canada trade relations and shape the CAD’s trajectory.
Outlook: data and policy in focus
Investors will closely watch upcoming U.S. housing data, including December’s building permits, housing starts, and industrial production figures, for further insights into economic momentum. On the Canadian side, clarity on the BoC’s monetary policy stance and external trade developments will play a key role in shaping near-term movements in the USD/CAD pair.
Earlier discussions highlighted the influence of robust Canadian employment data and diminishing rate-cut expectations from the BoC as key factors impacting the pair’s trajectory. These elements remain pivotal to the broader USD/CAD outlook.
