The USD/CAD pair is trading near its highest level since August 6 during the Asian session on Tuesday, with bullish momentum pushing the currency pair beyond the critical 1.3800 mark.
The US Dollar (USD) remains robust, hovering around a two-month high, driven by expectations for a less aggressive monetary policy easing by the Federal Reserve (Fed). Market sentiment is increasingly leaning toward a regular 25 basis points (bps) rate cut in November, which supports steady yields on the benchmark 10-year US government bond above the 4% threshold. This strong dollar performance has contributed to the USD/CAD pair’s ascent for the tenth consecutive day.
In contrast, recent developments in the oil market have negatively impacted the Canadian Dollar (CAD). A report on Monday indicated that Israel would refrain from targeting Iran’s oil and nuclear facilities, easing concerns over potential supply disruptions. Furthermore, China, the world’s largest oil importer, reported a fifth consecutive month of declining oil imports, raising alarms about weak demand. Additionally, OPEC has revised its global oil demand forecasts downward for 2024 and 2025, leading to a drop in crude oil prices. This decline has further weakened the commodity-linked Loonie, thereby bolstering the USD/CAD pair.
These factors largely overshadowed Friday’s positive Canadian jobs data, which had initially prompted investors to reassess expectations for a more significant rate cut by the Bank of Canada (BoC). As traders await the release of the latest Canadian consumer inflation figures later in the North American session, along with the Empire State Manufacturing Index and statements from Fed officials, the USD/CAD pair is poised for further movement.
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