By Ketki Saxena
Investing.com – The Canadian dollar weakened against its US counterpart and most major currencies today, as traders continue to bet on the Bank of Canada becoming one of the first major central banks to cut rates.
Markets currently expect the BoC to lower rates from their 22-year high of 5% in April 2024.
Absent any major economic data this week, the Canadian dollar was at the mercy of macro trends including a slide in crude prices, which fell to a 5-and-a-half-month low.
Analysts at Scotiabank (TSX:BNS) note, “The CAD is still not really finding much support on its own merits amid wide short-term rate spreads and a renewed slump in commodity prices.”
“There are limits on how much further it might be able to improve on fundamentals alone, all else equal.”
The US dollar meanwhile dipped and then recovered against a basket of major currencies following the CPI release, with the data fortifying expectations of cuts in May.
CPI rose 0.1% in November, and 3.1% on an annual basis, down from the 3.2% reading in October.
Next, all eyes will be on the US Federal Reserve’s interest rate decision tomorrow. The Fed is expectedto keep rates steady and reiterate its prior bias in terms of guidance.
On a technical level for the pair, analysts at FXStreet note, “The USD/CAD continues to hold chart territory north of the 200-day SMA just above the 1.3500 handle, keeping bids above the major moving average, but immediate topside momentum remains constrained by the 50-day SMA near 1.3700.”
“The pair is at risk of hardening into a sideways consolidation range, but the US Dollar (USD) is set up for further breakouts following central bank action on Wednesday.”