By Ketki Saxena
Investing.com -- The Canadian dollar was flat against its U.S. counterpart on Thursday in a day of muted trading with holidays in the US.
In recent days, the key drivers for the loonie have been economic data, such as cooling CPI and commentary that indicates rate cuts are likely to be the Bank of Canada’s next move.
Meanwhile, hawkish Fed minutes and stronger-than-expected employment data in the US have reduced the previous market certainty of rate cuts from the Fed as early as March 2024.
Analysts at Monex Canada note that the prospect of the BoC needing to ease rates before the Fed is set to be a tailwind for the loonie.
“The focus for markets should increasingly move towards rate cuts and whether or not the BoC will be forced to ease before the Fed in response to a weakening economy, an outcome which should see the loonie trade notably weaker than current levels against the dollar.”
Tomorrow’s half-day trading of US equity markets is likely to provide further impetus to the USD/CAD pair, as will Canadian retail sales and the US Purchasing Managers’ Index release.
On a technical level for the pair, analysts at FXStreet note that there is little momentum for the pair in either direction.
They write, “The Relative Strength Index (RSI) is drifting around the 50.0 middle level, while the Moving Average Convergence Divergence (MACD) has multiple levels of moving averages constraining it into the zero threshold, indicating an overall lack of strength in either direction.