Canadian Dollar treads water on tepid Monday

• Canadian Dollar middles as markets focus on Fed rate cuts.
• Canada issued far fewer building permits than expected in March.
• Markets continue to bet on two rate cuts in 2024 despite cautionary Fedspeak.

The Canadian Dollar (CAD) churned within familiar levels on Monday as a data-light economic calendar kicks off the new trading week. Investors continue to hinge risk appetite on rate cut expectations from the Federal Reserve (Fed) with updates to US inflation data due later in the week.

Canada saw a sharper-than-expected decline in new Building Permits issued in March, but data from early in the housing cycle remains low-tier and limited-impact. Canadian economic data remains low-priority for the rest of the week, leaving market participants to focus on the US Producer Price Index (PPI) due on Tuesday, followed by US Consumer Price Index (CPI) inflation and Retail Sales on Wednesday.

Daily digest market movers: Canadian Dollar stuck in the middle as rate cut hopes dominate

• Canadian Building Permits issued in March declined -11.7%, far below the -4.6% forecast, the sharpest decline in MoM Building Permits since June of 2023. April’s Building Permits were also revised slightly lower to 8.9% from 9.3%.
• The latest Survey of Consumer Expectations from the New York Fed noted that surveyed consumers expect inflation to rise to 3.3% over the next year, higher than the previous survey’s 3.0%.
• A Reuters survey of 108 economists showed nearly two-thirds of respondents still expect a quarter-point cut from the Fed by September despite none expecting inflation to reach the Fed’s 2% target before 2026.
• YoY US Producer Price Index inflation is expected to rise to 2.2% on Tuesday, compared to the previous period’s 2.1%.
• Wednesday’s US CPI inflation print for April is forecast to hold steady at 0.4% MoM, with the YoY figure expected to tick down to 3.4% from 3.5%.

Technical analysis: Canadian Dollar middles as markets hold steady

The Canadian Dollar (CAD) trades tightly on Monday, sticking close to the new trading week’s opening bids. The CAD is trading within a quarter of a percent against nearly all of its major currency peers on Monday and holding next to flat against the US Dollar (USD).

The USD/CAD is struggling to find momentum on Monday, holding in place near 1.3680. Bids are treading water just above a near-term supply zone from 1.3660 to 1.3615. Topside momentum is capped by the 200-hour Exponential Moving Average (EMA) just below the 1.3700 handle, while short-sellers have been unsuccessful in dragging the pair back down to 1.3600.

USD/CAD hourly chart

USD/CAD daily chart