Notwithstanding the significantly bigger drop in the Conference Board’s Consumer Confidence survey, USD/CAD is still trying to move lower. The Fed’s cycle of rate hikes could help to support the currency because the US central bank changes its monetary policy more quickly than the corresponding authority in Canada.
Even so, as the Atlanta Fed GDPNow model notes, “the estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2022 is -1.6 percent on July 19, down from -1.5 percent on July 15,” the looming menace threat of an economic downturn may compel the FOMC to produce smaller rate increases.
A change in the Federal Reserve’s forward guidance may also have a negative impact on the US Dollar if Chair Jerome Powell and Co. look to taper the hiking cycle in the weeks ahead.
Conversely, if USD/CAD fails to stay over the 50-Day SMA of 1.2854, price action may resemble that of May 2022, and an additional decrease in the rate of exchange might very well encourage a shift in buyer sentiment similar to that of early in 2022.
Provided that the central bank maintains its present position for monetary policy, the Federal Reserve rate announcement could maintain USD/CAD over the 50-Day SMA of 1.2854. But, if this does not happen, the exchange rate may mostly reflect the price movement from May 2022.