The Canadian Dollar (CAD) remained range-bound against the U.S. Dollar (USD) on Thursday, hovering near the 1.4400 mark as markets weighed mixed U.S. economic data and looming tariff threats from the United States.
The Bank of Canada (BoC) added to the pressure on the Loonie this week by cutting interest rates by another 25 basis points, further narrowing the rate differential between the two currencies. Meanwhile, U.S. President Donald Trump’s threat to impose 25% tariffs on Canadian goods, potentially effective February 1, has cast a shadow over the CAD, keeping investors cautious.
U.S. economic data took center stage on Thursday, leaving Canadian traders to await Friday’s release of Canada’s Gross Domestic Product (GDP) figures for November. However, the monthly GDP print is considered outdated and is unlikely to significantly impact market sentiment.
Key U.S. data included:
- Q4 GDP Growth: Slowed to 2.3%, missing forecasts of 2.6% and down from the previous quarter’s 3.1%.
- Weekly Jobless Claims: Fell to 207,000, beating expectations and improving from the prior week’s 223,000.
The weaker-than-expected GDP growth raised concerns about the U.S. economy’s momentum, while the decline in jobless claims pointed to ongoing resilience in the labor market.
The CAD has struggled to gain traction this week, down approximately 0.5% against the USD. With no significant Canadian economic data released on Thursday, traders are looking ahead to Friday’s GDP report, which is expected to show a contraction in November’s monthly growth figure.
The USD/CAD pair has been trading in a tight range for over six weeks, following the Loonie’s multi-year lows in mid-December. Key levels to watch include:
- Resistance: 1.4500, a critical level for USD bulls.
- Support: 1.4300, where the 50-day Exponential Moving Average (EMA) is rising, potentially offering a floor for the CAD.
The CAD is influenced by several factors, including:
- Interest Rates: Set by the Bank of Canada (BoC).
- Oil Prices: As Canada’s largest export, crude oil prices significantly impact the Loonie.
- Economic Health: GDP growth, inflation, and trade balance data.
- Market Sentiment: Risk-on or risk-off flows, with risk-on environments typically supporting the CAD.
- U.S. Economic Performance: As Canada’s largest trading partner, the health of the U.S. economy plays a crucial role in shaping CAD dynamics.
The Canadian Dollar remains under pressure amid a challenging economic backdrop, with mixed U.S. data and looming tariff threats adding to the uncertainty. Traders will closely monitor Friday’s GDP release and broader market trends for further direction.