USD/CAD rebounds from 1.3600 as US White House reaches bipartisan with Republicans
- USD/CAD has shown recovery from 1.3600 as the White House has made an agreement with Republicans on a US debt-ceiling raise.
- US President Joe Biden made no compromise on the US debt-ceiling but has compromised their spending initiatives.
- Resilience in the Canadian economy could force the BoC to start hiking interest rates again.
The USD/CAD pair has witnessed a buying interest near the round-level support of 1.3600 in the early Tokyo session. The Loonie asset has rebounded as the White House has reached a bipartisan with Republican leaders. US President Joe Biden has announced that a deal with Republicans’ approval is ready to move to Congress in which Democrats made no compromise on the US debt-ceiling but have compromised their spending initiatives for the budget.
S&P500 futures have added significant gains in early Asia. US equities have carry-forwarded optimism recorded on Friday. Shrugged-off fears of a default by the United States economy toward its obligated payments have infused some blood into US stocks. However, the real reaction by the market participants would be shown on Tuesday as US markets will be closed on Monday on account of Memorial Day.
The US Dollar Index (DXY) has rebounded to near 104.28 as the US borrowing limit has increased. Plenty of catalysts are supporting more gains in the USD Index. US inflation is getting more stubborn as households’ consumption expenditure is showing deep pockets despite higher interest rates from the Federal Reserve (Fed).
Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF) cited US interest rates will need to be higher for longer due to resilience in the economy. US Growth QoQ is expected 1.2% in 2023 and further momentum will pick up in 2024. The Unemployment Rate is seen rising slowly to near 4.5% by the end 2024.
On the Canadian Dollar front, investors will keep an eye on Canada’s Gross Domestic Product (GDP) data. As per the preliminary report, monthly GDP (March) is seen contracting by 0.1% vs. an expansion of 0.1% recorded in February. Q1 and annualized GDP are seen significantly expanding by 0.4% and 2.1% respectively vs. a stagnant performance. Resilience in Canadian economy could force Bank of Canada (BoC) Governor Tiff Macklem to start hiking interest rates again.
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.
