The USD/CAD pair exhibited slight fluctuations between modest gains and minor losses during Thursday’s Asian session, appearing to stabilize after a notable rebound from the 1.3620-1.3615 region, a three-week low reached on Tuesday. Currently, spot prices hover around the 1.3700 mark, reflecting minimal change as traders await crucial US macroeconomic data to inform new directional strategies.
Market attention is firmly set on the US Personal Consumption Expenditures (PCE) Price Index, scheduled for release on Friday. This index, regarded as the Federal Reserve’s (Fed) preferred measure of inflation, will significantly influence market expectations regarding future Fed policy actions, subsequently impacting USD demand and driving momentum for the USD/CAD pair. Prior to this, Thursday’s US economic releases, including the final Q1 GDP print, Durable Goods Orders, Initial Weekly Jobless Claims, and Pending Home Sales, are anticipated to offer short-term trading insights.
Despite the uncertainty surrounding the Fed’s timeline for initiating a rate-cutting cycle, which hampers the USD’s ability to build on the previous day’s rally to levels last seen in early May, the Canadian Dollar (CAD) finds support from diminished expectations of a July rate cut by the Bank of Canada (BoC). This sentiment follows Tuesday’s data indicating a surge in domestic consumer inflation in May, thereby limiting the upside potential for the USD/CAD pair. However, a downturn in Crude Oil prices, influenced by a surprise increase in US inventories reported by the Energy Information Administration (EIA) on Wednesday, which raises concerns about tepid demand from the world’s largest oil consumer, provides some support to the CAD.
Concerns about potential supply disruptions in Russia and the Middle East are expected to mitigate deeper losses in Crude Oil prices. Given these mixed signals, traders are advised to exercise caution and await robust follow-through buying before committing to any further near-term bullish positions on the USD/CAD pair.
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