USD/CAD appreciates to near 1.3750 due to lower Oil prices

USD/CAD continues its winning streak for a third successive session, trading around 1.3760 during the European hours on Tuesday. US Dollar (USD) remains strong as investors adopt cautious stance ahead of the Federal Reserve’s (Fed) interest rate decision scheduled on Wednesday.

The Federal Reserve is anticipated to keep interest rates steady in the range of 5.25%-5.50% as it aims to curb inflation toward its 2% target. Additionally, the US headline and core CPI figures for May are estimated to show year-over-year increases of 3.4% and 3.5%, respectively.

Robust US jobs data for May has reduced the odds of two Federal Reserve interest rate cuts in 2024. According to the CME FedWatch Tool, the likelihood of a Fed rate cut in September by at least 25 basis points has decreased to nearly 49.0%, down from 59.5% a week earlier.

On Loonie’s front, the decline in the crude Oil prices put pressure on the commodity-linked Canadian Dollar (CAD), given the fact that Canada is the largest Oil exporter to the United States (US). West Texas Intermediate (WTI) Oil price hovers around $77.30 per barrel, at the time of writing.

Crude Oil prices are bolstered by expectations of increased fuel demand this summer. According to Reuters, analysts at the energy consulting firm Gelber and Associates noted, "Futures are higher as expectations of summer demand are supportive of prices despite the broader macro landscape remaining less optimistic than weeks previous."

In Canada, the unemployment rate rose to a more than two-year high of 6.2% in May. However, the economy added more jobs than expected, and there was a notable increase in wage growth. Traders are likely to observe the BoC Governor Tiff Macklem as he is scheduled to speak on Wednesday at the Conference of Montreal 2024, where he will participate in a panel discussion about inflation.