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USD/CAD trades near five-month lows as BoC-Fed policy divergence favours the Loonie
Key Takeaways (30s Read)
USD/CAD trades near five-month lows as policy divergence benefits the Loonie.
The Canadian Dollar (CAD) has shown modest gains against the US Dollar (USD) on Wednesday. USD/CAD is currently trading around 1.3675, hovering near its lowest level since July 25. With markets moving into holiday mode, trading activity has been limited. However, the divergence in policy between the Bank of Canada (BoC) and the Federal Reserve (Fed) is influencing this movement, providing support to the CAD. While CAD may display strength in the short term, traders should be cautious of the reduced market liquidity during this period.
AI Analyst
AI Opinion
"The trading of USD/CAD near five-month lows is largely influenced by the divergence in policy between the BoC and Fed. While the Bank of Canada prioritizes inflation targets and suggests the possibility of rate hikes, the Federal Reserve maintains a cautious stance based on broader economic conditions. This policy divergence creates bullish sentiment towards the CAD in the short term. However, entering the holiday season, the reduced market liquidity poses risks for sudden price movements, warranting caution among traders."
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