USD/CAD grapples to retrace its gains on upbeat Crude prices, inches lower to near 1.3480

USD/CAD attempts to retrace its recent gains on the back of the improved Crude oil prices. The USD/CAD pair trades near 1.3480 during the Asian session on Tuesday. The Canadian Dollar (CAD) experienced losses against the US Dollar (USD) in the previous session, which could be attributed to the risk aversion sentiment over the escalated geopolitical situation in the Middle East.

West Texas Intermediate (WTI) price has continued its upward momentum for the second consecutive session, reaching around $74.70 per barrel, by the press time. The surge in Crude oil prices is primarily attributed to concerns over global energy supplies. These concerns have been heightened by a drone strike on Russia's Novatek by Ukraine, contributing to geopolitical tensions. Furthermore, disruptions in Crude oil production from the United States (US) due to extreme cold weather have added to the upward pressure on oil prices.

Traders will likely observe the December’s New Housing Price Index from Canada on Tuesday. On Wednesday, the Bank of Canada (BoC) is expected to release its Interest Rate Decision. Markets expect that the BoC will not adjust its current 5.0% policy rate.

The US Dollar Index (DXY) maintains stability following recent gains. The demand for the US Dollar is being driven by risk aversion sentiment, which is likely associated with the heightened geopolitical situation in the Middle East. Military actions, including new air strikes in Yemen by the United States (US) and the United Kingdom (UK) targeting Iran-led Houthi terrorists, have prompted investors to seek safety in the safe-haven US Dollar, which in turn, providing support to underpinning the USD/CAD pair.

The US Conference Board has reported a modest improvement in the Leading Economic Index for December. The index moved from -0.5% in November to -0.1% in December, surpassing expectations for an improvement to -0.3%. Looking ahead, Tuesday is anticipated to bring the release of the Richmond Fed Manufacturing Index for January, providing further insights into the state of the US economy.