The USD/CAD pair retraced its recent losses, trading around 1.3500 during the Asian session on Monday. The rebound is attributed to the weakened Canadian Dollar (CAD), which has been influenced by declining crude oil prices. As Canada’s largest export is oil, fluctuations in oil prices have a notable impact on the CAD.
West Texas Intermediate (WTI) crude oil prices fell for the second consecutive session, trading at approximately $72.50 per barrel. This decline is linked to plans by the Organization of the Petroleum Exporting Countries and their allies (OPEC+) to increase oil production in the coming quarter. According to Reuters, citing multiple sources, OPEC+ is set to proceed with an increase in oil output starting in October. Specifically, eight OPEC+ members are expected to boost production by 180,000 barrels per day (bpd) next month. This move is part of a strategy to gradually reverse their most recent production cut of 2.2 million bpd while maintaining other cuts through the end of 2025.
The US Dollar (USD) gained support as July’s Personal Consumption Expenditures (PCE) Index data led traders to reassess expectations for a significant Federal Reserve rate cut in September. The CME FedWatch Tool indicates that the market is anticipating at least a 25 basis point (bps) rate cut by the Fed at its September meeting.
Looking ahead, traders will focus on the upcoming US employment data, including the Nonfarm Payrolls (NFP) report for August, to gain further insights into the potential scale and timing of Fed rate cuts. Meanwhile, attention will also be on the S&P Global Manufacturing PMI data for Canada, scheduled for release on Tuesday, which could provide additional context for the CAD’s movements.
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