The USD/CAD currency pair rose for the sixth consecutive day on Wednesday, reaching the 1.3670-1.3675 range, marking its highest point since August 19 during the early European trading session. This upward movement is fueled by renewed buying interest in the US Dollar (USD).
After a brief period of consolidation over the last two days, the USD attracted new buyers as expectations solidified around a gradual approach to interest rate cuts by the Federal Reserve (Fed). Currently, traders are pricing in an over 85% likelihood that the US central bank will implement a 25 basis point reduction in borrowing costs in November, supported by signs of a resilient labor market. As a result, the yield on the benchmark 10-year US government bond remains above the 4.0% mark, further bolstering the USD and pushing the USD/CAD pair to its highest level since August 16.
In contrast, developments regarding a potential ceasefire between Hezbollah and Israel have lowered geopolitical risks, contributing to a decline in crude oil prices. This, along with expectations of a significant interest rate cut by the Bank of Canada (BoC) later this month, has weakened the commodity-linked Canadian dollar (Loonie) and propelled the USD/CAD pair higher, aided by technical buying above the 200-day Simple Moving Average (SMA).
Looking ahead, investors are anticipating the release of the Federal Open Market Committee (FOMC) meeting minutes later today, along with key economic indicators such as the US Consumer Price Index (CPI) and Producer Price Index (PPI) scheduled for Thursday and Friday. These reports will provide crucial insights into the Fed’s future rate-cut strategy, influencing near-term USD demand. Additionally, Canadian monthly employment data set to be released on Friday is expected to provide significant direction for the USD/CAD pair.
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