- USD/CAD has sensed demand after dropping to near 1.3330 amid negative market sentiment.
- Goldman Sachs sees two more interest rate hikes of 25 bps by the Fed in March and May.
- Oil price is likely to continue their downside as central banks have restricted their monetary policy further.
The USD/CAD pair has witnessed buying interest after a corrective move to near 1.3330 in the Tokyo session. The Loonie asset displayed a corrective move as the US Dollar Index (DXY) showed signs of exhaustion in the upside momentum after reaching to near 101.55.
The risk profile is extremely sour as risk-perceived assets like S&P500 futures have witnessed sheer selling pressure in the Asian session. The three-day winning streak in the S&P500 futures is expected to terminate as investors are worried that solid United States employment costs could dent the declining trend in the Consumer Price Index (CPI). This might result in a continuation of policy tightening by the Federal Reserve (Fed).
For the interest rate guidance, the Goldman Sachs Research team said in its client note that it expects the Fed to hike interest rates by 25 basis points (bps) consecutively in March and May. This way the central bank will reach the terminal rate of 5.00-5.25%. The client note claims that the Gross Domestic Growth (GDP) growth will slow to 1.4% in 2023, reflecting a negative impact from tighter financial conditions.
USD/CAD will see a power-pack action after the release of the United States Nonfarm Payrolls (NFP) data. Analysts at TD Securities expect a 220K increase in payroll and a modest increase in the Unemployment Rate to 3.6%.
On the oil front, the oil price is struggling to hold itself above the critical support of $76.00. The further downside in the oil price looks favored as western central banks have tightened their monetary policy to tame soaring inflation. It is worth noting that Canada is a leading exporter of oil to the United States and lower oil price will impact the Canadian Dollar.
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