The Canadian Dollar has fallen to four-week lows against the US Dollar, with the USD/CAD pair reaching 1.4230 following a 2% rally in less than a week. Strong US October CPI data and a robust Nonfarm Payrolls report have increased market expectations for a Federal Reserve rate hike in December, while weak Canadian employment data puts downward pressure on the Loonie.
Bullish
🤖 85%
USD/CAD hit fresh four-week highs at 1.4230, rallying nearly 2% in less than a week, as hotter-than-expected October US CPI (0.4% m/m) and a strong NFP lifted Fed hike bets, while Canadian data showed net job losses and rising unemployment. TD Securities sees USDCAD supported above 1.40, though the setup could reverse if the Fed opts against a December hike.
Catalysts
- ▲ October US CPI came in at 0.4% m/m, above the 0.3% threshold cited by Fed Governor Waller
- ▲ Fed officials Paulson and Logan signal more hikes, Logan calling for at least two more quarter-point increases
Risk Factors
- ▼ Markets still price only 12% odds of a jumbo 50bp hike in December, so a 25bp move is largely anticipated
- ▼ Any softening in Fed rhetoric would trim the rate-differential advantage built into the pair