- The Canadian dollar ended the month lower by 0.3%, weakened by the Bank of Canada’s first interest rate cut.
- Canada’s gross domestic product rose 0.3% in April, as expected.
- The US dollar fell as data revealed softer inflation in May.
The USD/CAD outlook remains bearish as the Canadian dollar remains firm after Friday’s upbeat GDP report. Meanwhile, the US dollar recovered but remained fragile after data further confirmed that inflation is easing towards the Fed’s 2% target.
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The Canadian dollar ended the month lower by 0.3%, weakened by the Bank of Canada’s first interest rate cut. The central bank was confident enough to reduce borrowing costs as inflation eased. At the same time, the economy has slowed significantly and struggled to grow since 2023. Accordingly, the recovery in April showed a recovery that led to a decline in interest rate cut expectations.
Canada’s gross domestic product rose 0.3% in April, as expected. After this report, markets reduced the probability of a rate cut in July from 65% to 45%.
On the other hand, the US dollar fell as data revealed softer inflation in May. The core PCE price index is the Fed’s best measure of inflation. It showed the annual figure eased to 2.6% in May, meeting forecasts. This is a step closer to the Fed’s 2% target and paves the way for rate cuts. As a result, traders were more confident that the Fed would cut rates starting in September, raising this probability to 63%.
However, policymakers may have to wait for more data to confirm this downward trend. The next big report comes on Friday, showing the state of the labor market. Economists expect fewer jobs in June than the previous month. Such an outcome would further support expectations of a rate cut.
USD/CAD Key Events Today
USD/CAD Technical Outlook: Price is retesting the 30-SMA after breaking below
On the technical side, the USD/CAD price is challenging the 30-SMA resistance after the bears pushed the price below the level. The general trend is pointing south as the price makes lower highs and lows. At the same time, it is trading within a bearish channel with clear support and resistance lines.
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The price recently retested the channel resistance line near the key 1.3720 level before falling. Therefore, there is a good chance that the channel will be supported. If the price remains below the 30-SMA with RSI below 50, the bears could revisit the support at 1.3640 and continue lower.
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