Ella 
USD/CAD extended its gains of the past two weeks, rising for the seventh straight session on Thursday. It was also the 10th day of gains in the previous 11 sessions, boosting spot prices to the highest level since April 17 near the 1.3820 area in Asia.
Crude oil prices hovered near a one-and-a-half-month low hit earlier this week amid concerns about slowing demand from China, the world’s largest importer. This, coupled with the dovish outlook from the Bank of Canada (BoC), continued to weaken the commodity currency Canadian dollar and became a positive factor for USD/CAD. In fact, the Bank of Canada cut its key policy rate by 25 basis points for the second consecutive month on Wednesday and said that more rate cuts may be possible if inflation continues to cool as predicted.
In addition, the Bank of Canada also lowered its economic growth forecast for 2024 to a sluggish 1.2% from the 1.5% forecast in April, and reiterated that inflation should return to the 2% target in the second half of 2025. The market reacted quickly and now sees a greater than 52% chance of another rate cut at the next monetary policy meeting in September. This has largely masked a small fall in the US dollar (USD), supporting the prospect of further appreciation in USD/CAD.
Nevertheless, expectations that the Federal Reserve (Fed) will begin a rate-cutting cycle in September may discourage traders from building new bets ahead of key US macro data releases. US second quarter gross domestic product (GDP) will be released later this Thursday, followed by the personal consumption expenditures (PCE) price index on Friday. This will have a key impact on the Fed’s policy path, which in turn will drive demand for the US dollar. In addition to this, oil price dynamics will also provide new directional momentum for USD/CAD.
