- Canada’s economy grew 1% in the third quarter.
- Markets have raised the odds of another large BoC rate cut from 31% to 50%.
- Market participants await the US non-farm payrolls report.
The USD/CAD outlook shows a weak Canadian dollar after data last week raised the likelihood of another big rate cut by the Bank of Canada in December. Meanwhile, the dollar was steady as market participants looked forward to key data and remarks from Fed policymakers.
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Data on Friday showed Canada’s economy expanded 1% in the third quarter, beating the Bank of Canada’s estimate of a 1.5% increase. At the same time, the figure was a big drop compared to the second quarter when the economy grew by 2.2%.
After the data, markets increased the odds of another big rate cut in December from 31% to 50%. Interest rates in Canada have fallen faster than anywhere else because the economy is extremely sensitive to high rates. Consequently, economic growth slowed sharply due to high borrowing costs.
AAt the same time, the economy faces the threat of 25% tariffs on goods exported to the US. If there are no negotiations between the two countries, the Canadian economy will suffer. At the same time, the Bank of Canada will be under greater pressure to boost growth with lower borrowing costs. On the other hand, the US economy has remained quite resistant to high rates.
Meanwhile, inflation has paused near the Fed’s 2% target. Although traders expect a rate cut in December, they expect a gradual pace in 2025. The Trump administration is likely to increase economic demand and reheat the economy. Elsewhere, market participants await Friday’s US non-farm payrolls report for more clues on the Fed’s December meeting. Currently, bets show a 65% chance of a rate cut.
USD/CAD Key Events Today
USD/CAD technical outlook: bullish candle
From the technical side, USD/CAD price paused at the 30-SMA resistance after a strong reversal signal. Price made a bullish capture pattern after reaching its bullish trend line. Although USD/CAD crossed the 30-SMA, it made more highs and lows, signaling a bullish trend.
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Consequently, there is a good chance that this trend will continue with a break above the 30-SMA. Bulls will aim to challenge the 1.4150 resistance level. The trend will only change if the price breaks below the trend line.
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