The Canadian Dollar (CAD) briefly touched a 14-week low against the US Dollar (USD) after the Bank of Canada (BoC) cut interest rates by 25 basis points, as widely anticipated. However, the CAD was further weakened by significant downward revisions to the BoC’s Canadian GDP growth forecasts, leading to the USD/CAD pair potentially recording a second consecutive week of gains.
Market Movers:
- BoC Rate Cut and Growth Forecast: The BoC’s rate cut to 4.5% was expected, but the substantial downward revision in growth forecasts surprised CAD traders. The 2024 GDP growth forecast was lowered to 1.2% from 1.5%, while the first-quarter 2024 growth projection was drastically reduced to 1.7% from 2.8%.
- US PMI Data: US Purchasing Managers Index (PMI) figures were mixed, with manufacturing activity contracting and services activity surging to its highest level since April 2022.
- Central Bank Commentary: BoC Governor Macklem affirmed that monetary policy remains restrictive.
Technical Analysis:
The Canadian Dollar’s performance on Wednesday was mixed, with minor gains against the Australian and New Zealand Dollars but losses against the rebounding Japanese Yen. Against the Greenback, the USD/CAD pair briefly reached a 14-week high, crossing the 1.3800 mark before settling back into its opening range. While intraday price action remains above 1.3780, momentum is increasingly favoring US Dollar buyers. Daily candlesticks are within a significant supply zone above 1.3750, and a bearish reversal could send the USD/CAD pair back towards the 200-day Exponential Moving Average (EMA) at 1.3609.
