The USD/CAD pair is extending its gains for the fourth consecutive session, trading around 1.3960 in early European trading on Wednesday. The rise in the US Dollar (USD) is primarily attributed to growing optimism surrounding the potential impact of US President-elect Donald Trump’s fiscal policies. These policies are expected to boost investment, government spending, and labor demand, which could, however, also bring inflationary pressures.
On Tuesday, Minneapolis Federal Reserve President Neel Kashkari expressed confidence in the central bank’s efforts to tackle transitory inflation but cautioned that it is too soon to declare full victory. He also indicated that the Fed would avoid making any assumptions about the economic consequences of Trump’s proposed policies until more details become available.
The Canadian Dollar (CAD) remains under pressure as crude oil prices continue to slide. As the largest oil exporter to the US, Canada is particularly sensitive to fluctuations in oil prices. Currently, West Texas Intermediate (WTI) crude is trading near $68.00, having dropped following a revision by the Organization of the Petroleum Exporting Countries (OPEC) of its global oil demand growth forecast for 2024.
With little economic data scheduled for release in Canada this week, the focus is on US inflation data, which traders expect to provide further guidance on potential US monetary policy adjustments.
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