USD/CAD continued its downward trend for the second consecutive day, trading around 1.3780 during Wednesday’s early European session. The Canadian Dollar (CAD) strengthened against the US Dollar (USD) primarily driven by surging crude oil prices, given Canada’s status as a major oil exporter to the United States. The escalation in oil prices exerted downward pressure on the USD/CAD pair.
At the time of writing, West Texas Intermediate (WTI) crude oil prices edged closer to $82.80 per barrel. This uptick is attributed to geopolitical tensions in the Middle East, specifically heightened operations by Israel in Gaza, prompting fears of supply disruptions. Israeli airstrikes in the southern Gaza Strip have led to significant Palestinian displacement.
Meanwhile, Canada’s S&P Global Manufacturing PMI remained unchanged at 49.3 in June, falling short of the anticipated 50.2 and marking the 14th consecutive month of contraction. Market attention now turns to Friday’s release of Canada’s Unemployment Rate for June, which is expected to rise to 6.3%.
The US Dollar faced pressure following Federal Reserve Chair Jerome Powell’s cautious stance on Tuesday, where he indicated the Fed‘s commitment to addressing disinflationary pressures cautiously. Powell emphasized the need for further economic evidence before considering interest rate cuts, citing ongoing strength in the US economy and labor market.
Adding to the cautious sentiment, Chicago Federal Reserve Bank President Austan Goolsbee highlighted potential weaknesses in the real economy during a CNBC interview. Goolsbee noted concerns and suggested that progress towards the Fed’s inflation target might accelerate unexpectedly.
The combination of these factors underscores the current dynamics influencing the USD/CAD pair, with oil prices and geopolitical developments in the Middle East shaping market sentiment alongside economic data releases and Federal Reserve signals.
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