USD/CAD falls sharply to 1.3800 despite multiple tailwinds
- 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.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
