Markets Brace for Rate Cuts: USD at Two-Week High, CAD Weakens

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3500-1.3600

Euro                 1.4900-1.5000

Sterling            1.7750-1.7850

WTI Oil (opening level) $72.08

The US Dollar index is slightly elevated as the market kicks off the first trading day of September which should prove to be a very active month. The Dollar is at a two-week high as investors turn their attention to the Federal Reserve interest rate announcement later this month where it is expected that they will cut interest rates by 0.25% but the market is also pricing in a 20% chance right now of a 0.50% reduction which would be a big change in policy. In addition the market will look at the data (including this week's employment data) leading up to the interest rate announcement on the 18th as they decide where the Greenback and stock markets will end up.

The Canadian Dollar is a little weaker to start the month as the Canadian market gets set for the Bank of Canada announcement tomorrow. It is expected that they will also cut interest rates by 0.25% but the market will be looking at the Bank's comments to determine what they are thinking about another rate cut in the coming months. We also get the Canadian employment this week so it is a busy start to the month for the Loonie.

There is lots of manufacturing data out of the US on the calendar today so markets will to look at how the economy is performing leading up to the Fed announcement. Stocks are poised for a big drop to start the month and the oil price is under pressure which will help to put the brakes on any Canadian Dollar strenght.