By Ketki Saxena
Investing.com – The Canadian dollar weakened against its US counterpart today ahead of tomorrow’s economic releases, including Canadian CPI and minutes from the Fed’s November meeting.
Tomorrow’s domestic October CPI report is expected to show that headline CPI slowed to 3.2% from 3.8% in September, according to a Reuters poll.
The release is unlikely to be a game changer, as market expectations are cemented for the Bank of Canada to stay on the sidelines, and begin cutting rates early next year.
The US dollar meanwhile was broadly lower against a basket of currencies, continuing to retreat as traders bet that the Fed is done hiking interest rates.
With expectations now for the next Bank of Canada and Fed moves to be rate cuts, analysts at Danske Bank note that “the near-term risks are for a further setback to the broad USD given weakness in US figures and as markets price in the first rate cut for March. This is likely to benefit CAD albeit not by as much as other cyclically sensitive currencies.”
“We expect the Bank of Canada to keep policy rates unchanged until Q1 2024 when we pencil in the first rate cut.”
On a technical level for the pair, analysts at FX Street note, “On the daily candlesticks, the USD/CAD is continuing to see bids pushing into dynamic technical support at the rising trendline from July’s 1.3100 lows. Bids continue to see support from the 50-day SMA, and the long-term trend appears to support continued USD strength.”
“On the bearish side, the USD/CAD is struggling to establish meaningful gains, and downside risks are mounting as the pair trades into the year’s high side."