Canadian Dollar softens on first day of trading week

To begin the new week, the Canadian dollar weakened versus the major rival currencies. This week, Canada has a small presence on the economic calendar. The Canadian dollar is dependent on significant central bank appearances based on mid-tier statistics.

Amidst market positioning in anticipation of the Federal Reserve’s anticipated rate call later this week, the CAD weakened on Monday, trailing an increase in the US dollar. This week’s economic schedule is light on the CAD, and a number of central bank appearances through the middle of the week will leave the currency vulnerable to changes in the overall market.

Expected to slip to 0.1% MoM from April’s 0.3% as Canada’s economy continues to stagnate, Wednesday’s Canadian Gross Domestic Product (GDP) for the month of May will be of interest to CAD traders due to the light economic data schedule. The S&P Global Canadian Manufacturing Purchasing Managers Index (PMI) for June is scheduled to be released on Thursday. Since May 2023, the PMI has continuously been in contraction zone, below 50.0.

For the ninth straight session, the Canadian dollar is expected to weaken vs the US dollar. It has decreased against the greenback for all but one of the previous 13 trading days. CAD traders immediately shifted their attention to the possibilities of yet another rate cut from the Bank of Canada (BoC) in September, with odds currently priced in at around even, following the BoC’s quarter-point rate decrease last week.

The US Federal Reserve will be the market mover this week as markets clamor for a 25-basis-point rate cut in the near future. The Fed is fully priced in as a hold on rates this week, but traders will be looking for verbal cues from Fed Chairman Jerome Powell regarding September’s rate call. According to the CME’s FedWatch Tool, rate traders have fully priced in 100% odds of at least a quarter-point cut when the Federal Open Market Committee gathers on September 18.