USDCAD Analysis 7-August-2024

The Canadian dollar strengthened to around 1.377 (USD/CAD), recovering from an eight-month low of 1.388 on August 1. This recovery was due to recession fears triggering a selloff of the US dollar despite Canada’s disappointing economic data.

USDCAD Analysis 7-August-2024

Recent US labor market and manufacturing reports have increased recession concerns in the US, leading to expectations of a 50 basis point rate cut by the US Fed in September and pushing the US dollar to seven-month lows. However, Canadian factory activity’s outlook remains grim, suggesting that the Bank of Canada might continue its rate-cutting cycle, which limits the Canadian dollar’s gains.

The manufacturing PMI dropped to 47.8 in July, the steepest decline since December. This marked a 15-month downturn due to reduced output and new orders amid inflation worries. Moreover, preliminary data indicated that GDP growth was just 0.1% in June, following a 0.2% rise in May.