USD/CAD clings to gains above 1.33 as oil drops sharply on escalating trade tensions
|- WTI drops below $54, erases more than 3% on the day.
- China retaliates with tariffs on $75 billion worth of US goods.
- Trump says he will respond to China, 10-year US T-bond yield drops more than 4%.
After dropping to a fresh daily low of 1.3275 in the early trading hours of the American session, the USD/CAD pair reversed its direction with the commodity-sensitive Loonie coming under renewed selling pressure due to the sharp fall witnessed in crude oil prices. As of writing, the pair was up 0.1% on the day at 1.3315.
Earlier today, the data published by Statistics Canada showed that retail sales in Canada remained unchanged on a monthly basis in June following May's 0.2% decline and beat the market expectation for a fall of 0.1% to provide a boost to the CAD.
All attention on US-China trade conflict
However, after China announced that it will be retaliating by introducing new tariffs on $75 billion worth of US imports triggered a strong reaction from Donald Trump and revived fears of a prolonged trade war. With the initial market reaction, trade-sensitive crude oil prices fell sharply with the barrel of West Texas Intermediate dropping below the $54 mark with a daily loss of more than 3% and caused the Loonie to weaken against its rivals.
US President Donald Trump in a Twitter thread said that the US doesn't need China and added that they would be "far better off" without China. "I will be responding to China’s tariffs this afternoon. This is a great opportunity for the United States," Trump tweeted out.
On the other hand, the Greenback struggled to find demand as investors started to price a higher probability of the Fed being forced to make an aggressive rate cut in September. The US Dollar Index, which spent the week above the 98 mark, lost its traction and was last down 0.45% on the day at 97.77, allowing the pair to limit its losses for the time being.
Technical levels to watch for
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.