USD/CAD stretches lower to near 1.3530 on improved Crude oil prices

USD/CAD retraces its recent gains reported in the previous two sessions, trading lower around 1.3530 during the European session on Tuesday. The US Dollar (USD) is experiencing some depreciation attributed to subdued US Treasury yields, which is exerting pressure on the USD/CAD pair. Furthermore, the Canadian Dollar (CAD) is receiving support from increased Crude oil prices, contributing to its strengthening against the US Dollar.

The US Dollar Index (DXY) loses ground after reporting profits in the previous two sessions. The DXY trades slightly lower around 104.40, which could be attributed to the weaker US Treasury yields. The 2-year and 10-year yields on US bonds stand at 4.44% and 4.14%, respectively, at the time of writing.

December’s PPI (YoY) reported a decline of 10.6%, against the anticipated decrease of 10.5% and the previous figure of 8.8%. While US ISM Services Prices Paid increased to the reading of 64.0 in January, from December’s reading of 56.7.

Federal Reserve (Fed) Chair Jerome Powell remarked that it was premature to think about easing monetary policy, emphasizing the importance of steering inflation toward its 2% target. He added that the Federal Reserve might initiate its first rate cut from the middle of the year.

West Texas Intermediate (WTI) oil price improves to near $73.00 per barrel on escalated tension in the Middle East. The WTI oil price might have supported the CAD, consequently, putting downward pressure on the USD/CAD pair. Furthermore, Canada’s Ivey Purchasing Managers Index data will be eyed on Tuesday, along with the BoC Governor Tiff Macklem’s speech.