The USD/CAD pair is struggling to attract buyers amidst a broad-based weakness in the US dollar. This is due to bets for a larger Fed rate cut and a positive risk tone that is weighing heavily on the buck. Additionally, the Loonie is being supported by a stronger recovery in oil prices this week, which is acting as a headwind for the USD/CAD pair.
The US dollar has sunk to over a one-week low as expectations grow for an oversized interest rate cut by the Federal Reserve next week. Signs of easing inflationary pressures in the US have bolstered these expectations, with data showing a deceleration in both the annual headline Producer Price Index and the core PPI. The markets are now pricing in over a 40% chance that the Fed will lower borrowing costs by 50 basis points at its upcoming policy meeting.
The depressed US Treasury bond yields near the 2024 low, combined with the positive risk tone, are weighing on the USD and creating a headwind for the USD/CAD pair. Additionally, the recovery in crude oil prices this week from their lowest level in over a year is supporting the Loonie and further contributing to capping the spot prices for USD/CAD. Market participants are now awaiting the release of the Preliminary Michigan US Consumer Sentiment Index and second-tier data from Canada, as well as monitoring US bond yields and broader risk sentiment which could influence USD demand.
The US dollar remains relatively strong against the Australian dollar, as shown in the percentage change table of major currencies. The heat map provided shows the fluctuations of major currencies against each other, with USD strengthening against the AUD. The USD/CAD pair is currently trading around the 1.3575 region, with any significant move still seeming elusive at this point. Traders are advised to watch for acceptance above the 1.3600 mark before considering new bets on the pair for the long term. Despite this, the spot prices are likely to register modest weekly gains as market dynamics continue to shift.
