- USD/CAD flat lines near 1.3800 in Friday’s early European session.
- The Fed cut the rates but signaled little urgency to lower borrowing costs quickly in the coming months.
- The Canadian July Retail Sales report will be in the spotlight later on Friday.
The USD/CAD pair trades on a flat note around 1.3800 during the early European trading hours on Friday. The US Dollar (USD) might receive some support from a less dovish than expected stance from the US Federal Reserve (Fed). Traders await the Canadian Retail Sales data for July for fresh impetus, which is due later on Friday.
The Fed decided to cut the interest rates by 25 basis points (bps) and signaled two more reductions by the end of this year at its September meeting. This is the Fed’s first reduction this year and puts the target range for its main lending rate at 4.0% – 4.25%.
Fed Chair Jerome Powell indicated that the latest move to lower interest rates was a risk management cut, adding that he doesn’t feel the need to move quickly on rates. A less dovish stance from the US central bank provides some support to the Greenback in the near term.
The Bank of Canada (BoC) surprised markets by cutting its key rate to a three-year low of 2.5% at its meeting on Wednesday, while signaling it could ease further if needed. The divergence in interest rate paths from the BoC and the US Fed could exert some selling pressure on the Loonie as the US central bank offered a far less dovish message after its first rate cut of the year.
Meanwhile, a rise in crude oil prices might lift the commodity-linked Loonie and create a headwind for the pair. It’s worth noting that Canada is the largest oil exporter to the US, and higher crude oil prices tend to have a positive impact on the CAD value.
