During the Asian trading session on Wednesday, the USD/CAD pair continued its upward momentum, hovering around 1.3650. The surge in risk aversion among investors has led to increased demand for the US Dollar, providing support to the pair.
The shift in market sentiment towards risk aversion followed comments from Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, suggesting that a rate hike could still be on the table. Kashkari’s remarks, indicating uncertainty regarding the disinflationary process and the possibility of rate adjustments, contributed to the downturn in risk appetite.
Furthermore, the appreciation in US Treasury yields bolstered the Greenback, with the US Dollar Index (DXY) trading higher at approximately 104.70. Notably, the 2-year and 10-year US Treasury yields stood at 4.96% and 4.54%, respectively, at the time of this report.
On the economic data front, the mid-tier US Housing Price Index (MoM) for March fell short of expectations, registering a mere 0.1% increase compared to February’s 1.2%, while the consensus forecasted a 0.5% rise.
Looking ahead, investors are closely monitoring New York Fed President John Williams’ scheduled speech and the release of the Fed’s Beige Book. These events will provide insights into the current economic landscape in the United States, based on assessments from key business contacts, economists, and market experts across the 12 Federal Reserve Districts.
Meanwhile, the Canadian Dollar (CAD) faced downward pressure amid a corrective decline in crude oil prices. Canada’s status as the largest oil exporter to the US, the world’s leading oil consumer, amplified the impact on the commodity-linked currency.
Despite this, Canada’s Industrial Product Price surged by 1.5% month-over-month in April, surpassing market forecasts and reaching an 8-month high. Similarly, the Raw Materials Price Index saw a notable increase of 5.5% month-over-month, exceeding expectations and indicating robust economic activity in Canada’s industrial sector.
