- Concerns grow over the Fed’s independence, likely leading to depreciation of USD/CAD.
- Fed Governor Cook’s departure may increase the likelihood of interest rate cuts.
- BOC Governor McClem reaffirms commitment to a 2% inflation target.
USD/CAD continues to decline for the third straight session, hovering around 1.3770 during early trading in Asia on Thursday. The pair is expected to weaken as the US dollar encounters difficulties amid rising worries regarding the independence of the US Federal Reserve. Market participants are also anticipating the second quarter’s gross domestic product (GDP) data from the US.
On Tuesday, US President Donald Trump announced that he had dismissed Fed Governor Lisa Cook from her position on the Federal Reserve Board. He indicated he is prepared for a legal dispute with Cook over alleged forged mortgage documents.
The removal of Fed Governor Cook may enhance the possibility of significant interest rate cuts, as Trump exerts ongoing pressure on central banks to lower borrowing costs. Using the CME FedWatch tool, traders currently see at least an 88% probability of a reduction of at least a quarter-point during the Fed’s upcoming September meeting.
China’s chief trade negotiator, Li Chenggang, stated on Thursday that China and Canada are maintaining open and constructive dialogue aimed at improving their economic and trade ties. He emphasized China’s readiness to address differences through practical and constructive measures.
Bank of Canada (BOC) Governor Tiff McClem commented on Wednesday that the central bank is not reconsidering its 2% inflation target in the near term, citing uncertainties surrounding trade and fluctuations in US tariffs. He pointed out that supply-side challenges could exert upward pressure on inflation. McClem also mentioned that the use of scenario analysis helps the BOC tailor its monetary policy to align with various potential economic outcomes.
