USD/CAD bears are in play ahead of Fed chair Powell speech

USD/CAD is under pressure by some 0.24% ahead of the Federal Reserve's chairman Jerome Powell's speech. Meanwhile, the Canadian dollar strengthened on Wednesday, paring back nearly all of its previous day's drop. Despite data suggesting that Canada's economy expanded faster than expected in the third quarter, the loonie on Tuesday fell to its worst level in over four weeks at 1.3645.

The USD/CAD exchange rate is 1.3553 at the time of writing and has fluctuated between a low of 1.3489 and a high of 1.3593. China risks continue to drive markets and signs that the nation would soon reopen its economy have lifted the commodity complex mid-week. The oil market helped CAD on Wednesday, with West Texas Intermediate prices increasing as China started immunizing senior citizens against COVID-19. Authorities announced the lifting of lockdowns in around half of the districts throughout the southern metropolis of Guangzhou on Wednesday afternoon.

Local officials were instructed to withdraw "temporary control orders" or to reclassify some regions as low risk in official announcements. They also declared the end of widespread PCR testing. OPEC+ is also expected to convene on Sunday with the possibility of reducing quotas once further at the same time as a report revealed a significant decline in US oil stocks.

Fed Powell speech eyed

Investors will be watching closely to see whether Fed chair Jerome Powell provides any new signs that the US central bank may be nearing the end of its tightening cycle as his speech is the important event for the day. 

Given the uncertainty around upcoming jobs and inflation reports, Powell may contest the idea that a turn is imminent. However, market expectations may become muddied if different Fed officials' opinions on future monetary policy diverge.

When it meets on December 13–14, the Fed is anticipated to raise rates by an extra 50 basis points. The fed funds rate is predicted by traders to rise to 5.06% in June from its current level of 3.83% before reverting to 4.69% by December 2023.