The USD/CAD pair halted its winning streak on Friday, trading around 1.3720 during the European session. The US Dollar had advanced against the Canadian Dollar earlier in the Asian market due to risk aversion sentiment. This was influenced by higher-than-expected PMI data from the US, signaling a hawkish sentiment surrounding the Fed’s policy rates. The S&P Global US Composite PMI rose to 54.4 in May, exceeding market expectations. The Fed expressed concerns about persistent inflation in the FOMC Minutes, leading to the possibility of delayed rate cuts.
The decline in crude Oil prices is putting pressure on the Canadian Dollar, as Canada is a major oil exporter to the US. WTI Oil prices have been falling for the fifth consecutive session, trading around $77.80 per barrel. Higher US interest rates could negatively impact economic activities in the US, reducing Oil demand. There is also speculation that the Bank of Canada might cut interest rates before the US Federal Reserve, weighing on the Canadian Dollar and supporting the USD/CAD pair.
Investors are awaiting Retail Sales data from Canada and US Durable Goods Orders on Friday, which will provide further insight into economic conditions in both countries. The expectation that the US Federal Reserve might delay rate cuts and the possibility of the Bank of Canada cutting interest rates before the Fed are factors driving the USD/CAD pair’s movements. The future direction of the currency pair will likely be influenced by upcoming economic data releases and any further comments from Fed officials regarding inflation and interest rates.
