- USD/CAD is drawing renewed selling interest on Thursday, facing downward pressure from a confluence of factors.
- Despite the Federal Reserve’s hawkish pause announced Wednesday, the US Dollar bulls remain on the defensive.
- A resurgence in buying activity surrounding Oil prices is providing support for the Canadian Dollar, consequently weighing on the USD/CAD currency pair.
The USD/CAD pair is failing to build upon the modest recovery witnessed in the previous session, which had pulled it away from levels near the year-to-date low. Instead, the pair is encountering fresh selling pressure during Thursday’s Asian trading session. Despite this downward pressure, spot prices remain constrained within a multi-week trading range, currently fluctuating around the 1.3815 mark, reflecting a 0.15% decline for the day. Market participants are closely monitoring upcoming Canadian economic data releases, including the latest inflation figures, which could provide further direction for the pair.
The US Dollar (USD) is struggling to attract significant buying interest amid persistent economic uncertainties, partly fueled by evolving trade policy stances. Remarks from key policymakers have further contributed to the cautious sentiment surrounding the USD. Specifically, comments suggesting a lack of urgency in finalizing trade agreements, coupled with a reluctance to reduce existing tariffs, are casting a shadow over the currency’s prospects. This dynamic largely overshadows the Federal Reserve’s (Fed) decision to maintain its hawkish stance on Wednesday, leaving USD bulls on the defensive and contributing to the downward pressure on the USD/CAD pair. The market is now pricing in a higher probability of further rate hikes by the Federal Reserve in the coming months, contingent on inflation data and overall economic performance.
Meanwhile, Crude Oil prices are experiencing renewed positive momentum, rebounding from an overnight pullback from a one-week high. This resurgence is providing a tailwind for the commodity-linked Canadian Dollar. In addition to oil price dynamics, optimism surrounding the potential for a new trade agreement between the United States and Canada is bolstering the Canadian Dollar (CAD), adding further downward pressure on the USD/CAD pair. However, the recent decision by OPEC+ to accelerate planned output increases has sparked concerns about a potential oversupply in the market. These concerns, coupled with anxieties about weakening demand amid fading hopes for a swift resolution to the US-China trade dispute, are likely to limit any substantial upside potential for Crude Oil prices. Investors are also keeping a close watch on geopolitical developments that could impact oil supply and prices.
