USD/CAD trades higher near 1.3710 on market caution, weak Oil prices
|- USD/CAD strengthens due to the Fed’s hawkish tone on interest rates trajectory.
- Stronger US jobs data bolster the US yields; contributing support for the US Dollar.
- Downbeat Crude oil prices put pressure on the Canadian Dollar.
USD/CAD traces the upward path on the fourth successive day, trading higher near 1.3710 during the Asian session on Wednesday. The pair is experiencing upward support amid cautious sentiment due to the US Federal Reserve’s (Fed) interest rates trajectory.
The US Dollar Index (DXY) hovers around 107.10 at the time of writing, aligned with the 11-month high marked on Tuesday. The US Dollar (USD) strength is driven by robust US employment data and higher US Treasury yields.
US JOLTS Job Openings exceeded expectations, contributing to an increase in US Treasury yields. The 10-year US Bond yield reached its highest level since 2007, hitting 4.85% on Wednesday.
The JOLTS report revealed that job openings improved to 9.61 million in August from the previous reading of 8.92 million, surpassing market expectations. Additionally, the hawkish tone surrounding the Fed to keep interest rates higher for a prolonged period is reinforcing positive sentiment for the Greenback.
Cleveland Federal Reserve President Loretta Mester indicated a likelihood of favoring an interest rate hike at the next meeting if the current economic conditions persist. On the other hand, Atlanta Fed President Raphael Bostic shared a patient perspective on the Fed's policy outlook, stating that there is no rush to raise or reduce rates.
Market participants are eagerly awaiting the US employment data, with the release of the ADP report on Wednesday and the Nonfarm Payrolls on Friday.
On the Canadian side, the S&P Global Manufacturing PMI was released on Monday. The report showed a decline to 47.5 in September from the previous reading of 48.0.
Additionally, downbeat Crude oil prices dragged the commodity-linked CAD lower as the country is the leading oil exporter to the US. West Texas Intermediary (WTI) Crude Oil trades lower around $88.00 per barrel by the press time.
Canada’s Ivey Purchasing Managers Index would likely be focused on by investors to gain further cues on business conditions in the country.
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