The USD to CAD exchange rate remains highly influenced by recent economic developments on both sides of the border. As of late October 2023, the USD has strengthened against the CAD, with the exchange rate hovering near 90-day highs at approximately 1.4055. This value is 1.2% above the three-month average of 1.3881, reflecting a relatively stable trading range of 2.3% from 1.3738 to 1.4055.
The US dollar's momentum can be attributed to a hawkish stance from the Federal Reserve. Following an anticipated rate cut, Fed Chair Jerome Powell indicated that further cuts are not guaranteed, suggesting a potential continuation of supportive monetary policy which buoyed the dollar. Analysis indicates that further remarks from Fed officials may enhance this hawkish sentiment, consequently underpinning the USD's strength.
In contrast, the Canadian dollar has faced downward pressure primarily due to declining oil prices, with recent trading reports indicating that crude oil prices dipped to approximately 65.07 USD, around 1.7% below the three-month average. This decline has influenced the commodity-linked CAD negatively, as Canadian economic performance is closely tied to oil revenue. Exacerbating this issue, forecasts suggest that Canada may face economic contraction, intensifying downward pressure on the CAD.
Moreover, CAD's recent performance was further affected by monetary policy shifts from the Bank of Canada, which cut interest rates to 2.5% to mitigate economic risks. As a result, the loonie has lost ground against its US counterpart amidst concerns regarding slowing growth and uncertainties around trade negotiations.
Analysts suggest that the future trajectory of the USD to CAD exchange rate will heavily depend on the performance of oil prices and the ongoing economic landscape in both countries. A potential rebound in oil prices could provide a lifeline to the CAD, while sustained strength in the USD may keep the exchange rate elevated. Investors should remain vigilant towards upcoming economic data releases and market shifts that may influence both currencies.
