We are pleased to bring you the latest edition of the series produced by our colleagues in RBC Capital Markets, hosted by George Davis, CMT, the award winning Chief Technical Analyst for Fixed Income and Currency Strategy. In this installment George discusses the FOMC being poised to begin an easing cycle, beginning with a 25 bps point cut expected at the September meeting.
Slowing inflation accompanied with normalization in the labour market has resulted in our rate strategist moving to a per-meeting pace for rate cuts, as opposed to a quarterly pace. This translates to a 25 bps cut at each of the September, November, December, January and March meetings, with a pause starting next May. Under this scenario, we may see a bit of a rebound in the USD but with the topside limited due to the number of rate cuts expected. Thus, George has lowered his USD profile not just against the Canadian dollar but against the other major currencies.
USDCAD is expected to end the year at 1.3750 and to peak at 1.3800 during the first half of next year, while ending 2025 around the 1.3600 level. For the month ahead, George expects a trading range of 1.3350 to 1.3850, with USD sellers viewing moves towards 1.3700 and higher as a selling opportunity.