USD/CAD sustains above 1.2800 as DXY rebounds, oil skids below $110.00, Fed’s Powell in focus
|- USD/CAD has scaled above 1.2800 as investors expect a hawkish tone from Fed’s Powell.
- The market participants are expecting a downbeat performance from the US PMI economic data.
- Weaker PMIs from around the world have dented oil demand.
The USD/CAD pair is advancing sharply higher after hitting a low of 1.2764 in early Tokyo. The pair has climbed above 1.2800 and has touched an intraday high of 1.2810. A rebound in the asset is backed by a modest recovery in the US dollar index (DXY) after a bloody Monday and a plunge in the oil prices.
The DXY is recovering gradually from monthly lows of 102.07 as short-coverings hit the counter. The market participants are awaiting the speech from Federal Reserve (Fed) chair Jerome Powell and the expectation of hawkish guidance for June monetary policy is forcing investors to liquidate their shorts in the DXY. As per the market consensus, an interest rate elevation by 50 basis points (bps) is expected from the Fed next month.
Apart from that, the IHS Markit will release the monthly S&P Purchase Managers Index (PMI) numbers in the New York session. The Composite PMI is seen at 55.5 against the prior release of 56. The Manufacturing PMI may slip to 57.9 from the previous figure of 59.2 while the Services PMI will release at 55.4 vs. 55.6 recorded earlier.
On the oil front, lower PMI numbers from the major economies are indicating weak consumption of oil. This has brought some significant offers in the oil prices and a downside move has been witnessed below $110.00. Lower oil prices are hurting the Canadian dollar as it will reduce its fund flows from oil exports to the US.
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