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The US Dollar is recovering from a selloff on Friday, while the Canadian dollar briefly rallied to a 19-week high. The USD/CAD pair is expected to record its fifth weekly decline in six straight weeks.
The Canadian dollar is struggling to catch bids as economic data from Canada points towards an economic slowdown. The Canadian monthly Gross Domestic Product failed to print growth for a fourth straight reporting period in October, coming in flat at 0.0%.
The US Personal Consumption Expenditures (PCE) Price Index eased back from market forecasts as inflation drains away faster than economic models predicted, ramping up money market bets of faster and more frequent rate hikes from the Fed in 2024.
With US inflation steadily declining, investors’ bets on Fed rate cuts next year have ramped up significantly, with market expectations running well ahead of the Fed’s own rate outlook. The USD/CAD pair pulled back into neutral territory on the day, clawing back towards the 1.3300 handle as market volatility takes a step higher heading into the week’s close.
The pair is still down on the week, down eight-tenths of one percent from Monday’s opening bids and in the red by 2.5% from the last swing high into 1.3620.
