USD/CAD trades with modest losses below 1.3600 amid bullish Oil prices, weaker USD – by hareshmenghani USDCAD China Recession Fed Currencies
Bullish Oil prices underpin the Loonie and act as a headwind amid a modest USD weakness.The USD/CAD pair
attracts some sellers near the 1.3600 round-figure mark on Friday and maintains its offered tone through the early European session. The pair is currently placed around the 1.3575 region, down just over 0.10% for the day, though any meaningful downside still seems elusive. Crude Oil prices hold steady near a two-week high touched on Thursday amid the latest optimism about a strong fuel demand recovery in China - the world's top importer. This, in turn, is seen underpinning the commodity-linked Loonie, which, along with a modestdowntick, exerts some downward pressure on the USD/CAD pair. That said, growing worries that rapidly rising borrowing costs will dampen global economic growth and dent fuel demand could cap gains for Oil prices.
The US CPI, PPI and the PCE Price Index released recently indicated that inflation isn't coming down quite as fast as hoped. Moreover, the incoming upbeat US macro data, including the Initial Jobless Claims on Thursday, pointed to a resilient economy. Adding to this, a slew of FOMC members backed the case for higher rate hikes to tame stubbornly high inflation and remains supportive of elevated US bond yields.
Apart from this, speculations that the Bank of Canada could pause the policy-tightening cycle, bolstered by the softer Canadian CPI report released last week, warrant caution before placing aggressive bearish bets around the USD/CAD pair. Hence, it will be prudent to wait for strong follow-through selling before confirming that the recent upward trajectory witnessed over the past two weeks or so has run its course.
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