USD/CAD hovers around 1.3632 ahead of BoC’s decision

The USD/CAD pair falls below its opening price by 0.57% as expectations and bets accelerate on Fed’s intention to slow the pace of policy and monetary tightening. These bets do weaken the US Dollar.

Disappointing US housing data and consumer confidence deterioration also hurt the American dollar. Estimates refer to the possibility for Bank of Canada to hike rates by 75 bps on Wednesday. The USD/CAD creeps lower in the US session as the American currency weakens on Tuesday.

US companies reporting better-than-expected earnings. This news particularly keeps a risk-on appetite. At the time of writing, the USD/CAD is trading at 1.3628.

The financial markets narrative shifted since last Friday on news that the Federal Reserve might slow the pace of interest-rate hikes, further clarified by the San Francisco Fed President Mary Daly and the St. Louis Fed President James Bullard, with both supporting the view that 75 bps would not be the standard. At the same time, Bullard added that would be discussed at November’s Federal Reserve Open Market Committee (FOMC).

The US economic calendar featured US housing data, which added to the ongoing economic slowdown in the US. August’s Home Prices rose by 13%, less than July’s 15.6% reading, as reported by S&P CoreLogic Case Shiller. Meanwhile, the Federal Housing Finance Agency featured that home prices in August jumped by 11.9% YoY, below July’s 13.9%.

Meanwhile, the Conference Board’s Consumer Confidence Index dropped to 102.5, below estimates of 105.9, primarily blamed on growing concerns about inflation and a possible recession in 2023.

Consumers plan to buy a home over the next six months, even though borrowing costs are increasing. She added that “inflationary pressures will continue to pose strong headwinds to consumer confidence and spending, which could result in a challenging holiday season for retailers.

Aside from this, the Canadian calendar is empty ahead of Wednesday’s BoC’s monetary policy decision. Analysts said that they expect the BoC to lift 75 bps in October and a further 25 bps in December and forecast the BoC rates to peak at around 4.25%.