USD/CAD slumps below 1.4400 as USD takes breather after a sharp run-up
- USD/CAD slumps to near 1.4360 as the US Dollar corrects mildly after a robust rally.
- The Fed sees two interest rate cuts in 2025 amid strong economic growth.
- The US economy expanded at a faster pace of 3.1% in the third quarter of the year, slower than the preliminary estimate of 2.8%.
The USD/CAD pair falls sharply to near 1.4360 in Thursday’s North American session after posting a fresh more than four-year high at 1.4467. The Loonie pair slumps as the US Dollar (USD) bulls take a breather after a stalwart rally. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, corrects after refreshing two-year high near 108.25.
The Greenback rallies on Wednesday after the Federal Reserve (Fed) signaled fewer interest rate cuts for 2025 in the monetary policy meeting in which it reduced its key borrowing rates by 25 basis points (bps) to 4.25%-4.50%. According to the Fed’s dot ploy, policymakers see Federal Fund rates heading to 3.9% by the end of 2025.
Fed Chair Jerome Powell guided a cautious approach on interest rate cuts amid uncertainty over inflation, easing downside risks to employment and strong growth in the second-half of the year.
On the economic front, second estimate for the Q3 United States (US) Gross Domestic Product (GDP) data has shown that the economy rose at a faster pace of 3.1% than the preliminary estimate of 2.8%. Initial Jobless Claims for the week ending December 16 have come in lower at 220K than estimates of 230K and the former release of 242K.
Meanwhile, the outlook of the Canadian Dollar (CAD) remains bearish as the Bank of Canada (BoC) is expected to ease its interest rates further amid growing risks of inflation undershooting the bank’s target of 2%.