- USD/CAD slumps to 1.3800 even though the US Dollar exhibits strength.
- Investors see the BoC choosing the June meeting as their earliest point for pivoting to rate cuts.
- Oil prices weaken as Fed Powell’s hawkish guidance raises doubts over global economic outlook.
The USD/CAD pair dipped to round-level support of 1.3800 in Wednesday’s early American session. The Loonie asset faces pressure despite multiple tailwinds, such as higher Bank of Canada (BoC) rate cut hopes, a sharp decline in the Oil price, and hawkish guidance from Federal Reserve (Fed) Chair Jerome Powell.
The S&P 500 opens on a positive note, suggesting an improvement in the risk appetite of the market participants. 10-year US Treasury yields edge down to 4.64% but are still close to a five-month high as Fed Powell supported the argument of keeping interest rates higher for a longer period.
Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, turns sideways above 106.00.
Traders are pricing in a rate cut by the BoC in the June meeting as inflation remains on course towards the required rate of 2%. The BoC’s preferred inflation measure, the Core Consumer Price Index (CPI), which excludes eight volatile items, softened to 2.0% from the prior reading of 2.1%.
Last week, BoC Governor Tiff Macklem acknowledged that a rate cut in June is possible if inflation continues to decelerate sustainably after keeping interest rates unchanged at 5%.
Meanwhile, West Texas Intermediate (WTI), futures on NYMEX, have dropped to $84.00 as the dismal global economic outlook outweighs tight supply fears. Higher prospects for the Fed maintaining the monetary policy framework for a longer period weigh on the Oil price. Investors fear the global oil supply remaining tight amid deepening Middle East tensions.
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