USD/CAD remains in the negative territory after paring losses, trades around 1.3580
|- USD/CAD faced challenges due to lower US Treasury yields on Tuesday.
- The lower WTI price could contribute to pressure on the Canadian Dollar.
- Greenback could struggle on market expectations of the Fed commencing an easing cycle.
USD/CAD trims intraday losses but remains in the negative zone, which could be attributed to an improved US Dollar (USD). The USD/CAD pair edges lower to 1.3580 during the Asian trading hours on Tuesday.
Additionally, the decline in Crude oil prices could have provided pressure to undermine the Canadian Dollar (CAD), reinforcing the USD/CAD pair. West Texas Intermediate (WTI) oil price edges lower to near $81.70 per barrel, by the press time. However, oil prices strengthened after the United States Energy Information Administration (EIA)increased its forecast prices for Crude oil and petroleum products for the remainder of 2024.
Moreover, the Canadian Dollar (CAD) encountered downward pressure following indications from the Bank of Canada (BoC) of possible rate cuts in 2024, as revealed in its latest meeting minutes. Deputy Governor Toni Gravelle reiterated the central bank's commitment to completing quantitative tightening by 2025, underscoring its sustainability amid incremental interest rate decreases. Investors are likely to await the release of Canadian Gross Domestic Product (GDP) data for January, scheduled for Thursday, which could further impact market sentiment.
The US Dollar Index (DXY) attempts to retrace its recent losses, inching higher to near 104.20, by the press time. However, the decline in the US Treasury yields, which could have put pressure on the US Dollar. Market sentiment is leaning towards expectations of the Federal Reserve (Fed) commencing an easing cycle, with speculations pointing towards a potential start in June. Traders will likely watch Consumer Confidence for February on Tuesday.
Atlanta Fed President Raphael Bostic anticipates only one rate cut this year, emphasizing the potential for increased disruption if rates are reduced prematurely. Conversely, Chicago Fed President Austan Goolsbee aligns with the majority of the board, foreseeing three cuts. However, Goolsbee emphasizes the importance of additional evidence showing a decline in inflation before advocating for rate cuts.
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