USD/CAD moves below 1.3200 on dovish Fed’s outlook, US mid-impact data eyed

• USD/CAD faces challenges on improved market sentiment.
• Traders price in the speculation of policy easing by the Fed in the upcoming year.
• Downbeat US Treasury yields added to the downward pressure on the Greenback.
• Canadian GDP continues to point towards an economic slowdown.

USD/CAD hovers below 1.3200 during the Asian trading hours on Wednesday. However, Canadian economic data showed an economic slowdown. Canadian Gross Domestic Product (GDP) (MoM) failed to print growth for a fourth straight in October, coming in flat at 0.0% after September’s GDP print saw a downside revision from a meager 0.1% to flat.

However, the US Dollar (USD) encounters downward pressure due to growing speculations of potential easing by the US Federal Reserve (Fed), which limits the advance of the USD/CAD pair. The prevailing weakening sentiment is further amplified by the decline in US Treasury yields, adding to the factors undermining the strength of the US Dollar.

Moreover, former Dallas Federal Reserve President Robert Kaplan shared his insights with the media on Tuesday. Kaplan underscored the Federal Reserve's previous error of maintaining prolonged excessive accommodation, even in the face of positive economic indicators. He expressed the belief that the central bank is now cautious to avoid repeating this mistake on the flip side, being mindful not to become overly restrictive and potentially impede economic growth.

Additionally, the US Bureau of Economic Analysis (BEA) reveals a softer Core Personal Consumption Expenditures (PCE) – Index for November, which contributed to pressure for the US Dollar. US Core PCE Inflation (YoY) grew at 3.2%, falling short of the 3.3% expectations and 3.4% prior. At the same time, the MoM data showed consistency at 0.1% against the market expectation of 0.2%.

Thursday will bring the release of Initial Jobless Claims and Pending Home Sales data from the United States (US). Meanwhile, there are no scheduled data releases on the Canadian economic docket for the week.