The Canadian dollar depreciates amid cautious sentiment and weakness in energy markets. Oil prices fall aggressively on global demand worries. USD/CAD volatility could spike next week, with the September FOMC decision on tap.
From a shorter-term perspective, there are important catalysts on the horizon worth keeping an eye on; one of them being the September FOMC decision next week. The Fed is expected to raise borrowing costs by 75 basis points to 3.00%-3.25%, but traders may be more focused on the dot-plot to assess the new terminal rate estimate and the broader policy outlook.
If the U.S. enters a recession, Canada’s economy could take a major hit, given the strong trade relationship between both countries. The possibility of this scenario materializing will keep traders on edge, making the Canadian dollar vulnerable to outsize losses from time to time.