USD/CAD comes close to annual high near 1.3870 as oil retreats

The USD/CAD pair comes closer to an annual high around 1.3870 as global oil prices retreat after facing stiff barricades above the crucial resistance of $85.00. The Lonnie asset gains almost 0.15%, at the time of writing, despite a sell-off in the US Dollar. The Loonie asset strengthened despite a sharp fall in the US Dollar Index (DXY) indicating that the Canadian Dollar is significantly weak.

The S&P500 opens on a positive note but struggles for a firm footing as the broader market mood is risk-off amid a focus on Middle East tensions. Investors see further escalation in Mid-East conflicts as the Pentagon reported that the US army carried out air strikes on bases in eastern Syria.

The USD Index dropped vertically to near 106.30 as the steady United States core Personal Consumption Expenditure (PCE) price index report is insufficient to impact the widely anticipated unchanged monetary policy decision by the Federal Reserve (Fed) on November 1. Monthly US core PCE accelerated at an expected pace of 0.3% in September against 0.1% growth in August. The annual core PCE rose by 3.7% but decelerated from the August reading of 3.9%.

As per the CME Fedwatch tool, traders see the Fed keeping interest rates unchanged at 5.25-5.50% almost certain. The odds of one more interest rate increase in any of the two remaining monetary policy meetings in 2023 have dipped sharply to 20%.

Meanwhile, investors continue to dump the Canadian Dollar amid declining oil prices. It is worth noting that Canada is the leading exporter of oil to the United States and higher oil prices support the Canadian Dollar.