USD/CAD oscillates around 1.2870 ahead of Fed Powell and US economic data, oil advances

The USD/CAD pair is hovering around 1.2870 after a mild correction from the critical hurdle of 1.2880 in the early Tokyo session. Earlier, the asset rebounded firmly after hitting a low of 1.2820 on Tuesday. The major picked bids amid a firmer rebound in the US dollar index (DXY).

The DXY is attempting to overstep the current hurdle of 104.50 backed by higher expectations of extreme hawkish comments from Federal Reserve (Fed) chair Jerome Powell in his speech. The Fed has already elevated its interest rates to 1.50-1.75% along with the balance sheet reduction program, however, their impact has not been reflected yet on the inflation rate. Therefore, a consecutive rate hike by 75 basis points (bps) is expected to be discussed in his speech.

In addition to Fed Powell’s speech, investors’ focus will also remain on the release of the US Personal Consumption Expenditure (PCE), which is expected to remain stable at 7% for the first quarter. Also, the core PCE is seen unchanged at 5.1%. It is worth noting that as per the ongoing situation a stable of higher side PCE figures are vulnerable for the US economy as it will escalate recession fears.

On the oil front, oil prices have established themselves comfortably above the psychological resistance of $110.00. The market participants are worried about the supply constraints as it won’t be a cakewalk to substitute Russian oil with any other exporter. It is worth noting that Canada is the largest producer of oil to the US, therefore higher oil prices fetch higher funds for the Canadian economy.