By Ketki Saxena
Investing.com -- The Canadian dollar weakened moderately against its US counterpart today, as the greenback rallied against a basket of major currencies, supported by stronger-than-expected US GDP data that had investors reconsidering bets that the Fed's 25 bps rate hike yesterday will be its last.
US GDP expanded by 2.4% on an annual basis in the April to June period, as per a preliminary reading by the Commerce Department, exceeding expectations for a 1.8%.expansion, and remaining above the 2.0% growth seen in the first quarter of 2023.
The US dollar was also supported against major currencies, including the Euro, as the European Central Bank struck a dovish note.
However, the Canadian dollar's losses were limited as the commodity-linked loonie gained support from crude prices, which settled close to their April peak on the prospect of robust US economic growth that reinforced an optimistic demand scenario, expectations for Chinese demand, and supply tightness driven by OPEC+ production cuts.
Canadian dollar losses were also limited by expectations that the Bank of Canada and the US Federal Reserve are likely to stay on a similar monetary policy path in the near future.
On a fundamental level for the pair, analysts at Scotiabank (TSX:BNS) note "The feeling is perhaps that the Fed and the Bank of Canada are on similar flight paths as far as interest rates go. Unless or until there is some sort of major break in that thinking in the market we probably will stay relatively rangebound."
On a technical level for the pair, analysts at Scotiabank note that the trend for the USD/CAD pair is neutral in the short term, and bearish in the medium term.
They explain, "‘Neutral’ because the sideways pattern of trade is extending a little further below resistance in the low/mid-1.32s. And ‘bearish’ because the broader pattern of short-term trading is still shaping up negatively (bearish wedge) for the USD, with the base of the pattern (1.3160) coming under a little pressure. "