USD/CAD continues to remain sideways around 1.3450 as focus shifts to BoC policy

The USD/CAD pair is consistently showing back-and-forth action around 1.3430 in the early New York session. The Loonie asset is struggling to deliver a decisive move as investors are shifting their focus toward the interest rate decision by the Bank of Canada (BoC), which will be announced on Wednesday.

S&P500 futures are showing nominal gains before the opening of the American session. The overall market mood is quite upbeat as the Federal government has successfully eradicated the case of a default by the United States economy.

The US Dollar Index (DXY) has registered a fresh day's high at 104.40. Investors are gung-ho for the USD Index as consistent higher additions of fresh payrolls in the US labor market is supporting hopes of the continuation of the policy-tightening spell by the Federal Reserve (Fed).

It is worth noting that the Loonie asset is inside the woods despite sheer strength in the USD Index, which indicates that the Canadian Dollar is also strong.

The trigger that has been supporting the Canadian Dollar is the upbeat oil prices after the announcement of fresh oil production cuts seldom by Saudi Arabia. Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, said on Sunday, “Saudi Arabia to make extra 1 million b/d output cut from July.” He further added the Kingdom will extend its 500k barrels per day (b/d) voluntary cut until the end of 2024.

Investors should note that Canada is the leading exporter of oil to the United States and higher oil prices are supporting the Canadian Dollar.

This week, the interest rate policy by the BoC will be keenly watched. BoC Governor Tiff Macklem is expected to keep interest rates steady at 4.5% as Canada’s inflation has been steadily declining. In April, Canada’s inflation was recorded at 4.4%.