The Canadian dollar has remained relatively stable this week, with only slight softening as markets search for direction. Bank of Canada (BoC) Governor Tiff Macklem spoke in London on Tuesday but refrained from providing any clear insights on the BoC’s interest rate trajectory or the possibility of a 50-basis-point rate cut. This left market participants looking to other events, such as the upcoming U.S. presidential debates, which could influence market sentiment.
Following a volatile week for U.S. stocks, major indexes rebounded at the start of this week, offering some support to the Canadian dollar by easing ‘risk-off’ sentiment. Last Friday, the U.S. Labor Department reported 140,000 new jobs for August—slightly below expectations of 161,000 but an improvement from the previous month’s figures. This helped lower the U.S. unemployment rate from 4.3% to 4.2%.
Despite signs of weakening in the U.S. labor market—evidenced by a declining three-month moving average for the past five months—Friday’s report wasn’t weak enough to prompt a more aggressive rate cut from the Federal Reserve. The ambiguous nature of the report underscores a key challenge: forecasting the future of monetary policy and its effects on markets, particularly the FX market, will remain uncertain in the near term.
Until a catalyst emerges to drive the USD/CAD currency pair, expect the Canadian dollar to trade within a range of 1.3570 to 1.3730.
The Canadian dollar is currently trading at 1.3608 CAD against the US Dollar.
