Traders Brace for Major Movements in USD/CAD Amid Economic Shifts

Traders are preparing for significant changes in the USD/CAD currency pair as expectations rise for a potential 50-basis-point interest rate cut by the Bank of Canada (BoC) due to struggling economic growth in Canada. This comes as U.S. retail sales unexpectedly surged, boosting the dollar and adding to speculation surrounding Donald Trump's potential return to the presidency. The Canadian economy is facing challenges, with inflation dropping to 1.6%, which has increased bets on further rate cuts by the BoC. As a result, the USD/CAD pair is currently hovering around 1.3825, showing bullish momentum. Upcoming data releases from both countries will be crucial for determining the market direction moving forward. Barclays research suggests that traders should buy dips in USD/CAD, anticipating that the Canadian dollar will underperform as the U.S. economy heads for a soft landing and the Federal Reserve begins to cut interest rates. The reliance of Canada's economy on the U.S. as an export market presents downside risks, and a relatively dovish interest rate stance from the BoC could further weaken the Loonie. The Barclays team recommends buying USD/CAD on dips towards 1.36, while also noting that in a hard landing scenario, the Canadian dollar may outperform other cyclical commodity currencies. Additionally, the Pound to Canadian dollar rate is expected to fall when USD/CAD rises and vice versa. [b0a27c0d][92b2e731]