During the Asian trading session on Wednesday, the USD/CAD pair maintained a subdued stance, hovering near 1.3570. Despite a firmer US Dollar (USD) and an uptick in crude oil prices, the currency pair showed minimal movement. The resilience of the USD was evident despite lower US Treasury yields.
Market participants keenly awaited the Bank of Canada’s (BoC) interest rate decision, widely anticipated to remain unchanged at 5.0%. Additionally, attention was drawn to the release of US Consumer Price Index (CPI) data and the Federal Open Market Committee (FOMC) Minutes later in the North American session.
The Canadian Dollar (CAD) faced pressure due to hurdles encountered by crude oil prices. Concerns over the security of Middle Eastern oil supplies resurfaced amidst an impasse in Gaza ceasefire negotiations, offsetting the impact of a larger-than-expected rise in US Crude inventories. West Texas Intermediate (WTI) oil prices lingered around $84.70 per barrel at the time of reporting.
Despite challenges, the US Dollar (USD) maintained its position, even in the face of lower US Treasury yields. The US Dollar Index (DXY) consolidated around 104.10, with 2-year and 10-year yields on US Treasury bonds registering at 4.73% and 4.35%, respectively.
Federal Reserve (Fed) Bank of Minneapolis President Neel Kashkari reiterated the central bank‘s commitment to curbing inflation. Emphasizing the importance of reining in the current inflation rate of approximately 3% to the targeted level of 2%, Kashkari highlighted the Fed’s dedication to combating inflationary pressures.
Investors remained cautious, anticipating potential policy adjustments influenced by incoming economic data. Strong labor market indicators from the previous week could prompt a more hawkish stance from the Federal Reserve if inflation surpasses expectations, leading to heightened vigilance among market participants.
