Home Forex News USD/CAD Rebounds Amid Canadian Economy Recovery Concerns

USD/CAD Rebounds Amid Canadian Economy Recovery Concerns

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  • Canada Economic Recovery Concerns
  • Rising Canadian Consumer debt
  • Coronavirus Concerns

USD/CAD was rangebound in the European session, on Friday, as a rally to two-week highs cooled off on dollar weakness. The U.S dollar was down, having weakened by more than 0.1% against a basket of the G10 currencies.

 CAD – Greenback Weakness

The pair remains at 1-week lows in the wake of Bank of Canada deputy, Larry Schembri reiterating that consumer spending is likely to remain subdued until a coronavirus vaccine is made available. Concerns about economic recovery in the aftermath of the COVID-19 pandemic continue to weigh heavily on the Canadian Dollar against the U.S dollar.

The USD/CAD has already bounced off three-month lows as traders remain skeptical of the road ahead amidst the COVID-19 pandemic. While the U.S economy is not doing any better, the greenback has always strengthened, given that traders view it as a safe-haven in times of such crisis.

Concerns about the Canadian Economy should continue to weigh significantly on the USD/CAD exchange rate going forward. Consumer debts have surged significantly in recent months surpassing Canada’s GDP.

About 700,000 households have already opted to defer mortgage payments for up to six months due to the financial struggles triggered by COVID-19. As it stands, consumer debts that continue to rise are seen as a major risk to the country’s financial system.

USD/CAD Outlook

However, weakness in the U.S dollar has helped prevent the USD/CAD edging higher amidst the CAD weakness. Conversely, the pair has remained rangebound, opting to oscillate between $1.36 and $1.35.

However, things could change in the weeks ahead as the threat of a second wave of coronavirus threatens to take a toll on the U.S and Canadian economy. If that was to happen, the Dollar is likely to strengthen, as was the case in the first round a move that could send the USD/CAD pair higher. The greenback tends to strengthen in times of crisis.

Looking ahead, the focus is on FED speeches, on a light day on economic releases. The speeches could influence dollar strength, conversely affect USD/CAD price action.

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