The USD/CAD pair found support near the mid-1.3900s during the Asian session on Wednesday, marking a one-week low. After retreating from its highest level since May 2020 earlier this week, the pair has stalled its descent, with spot prices struggling to gain significant momentum. This comes amid mixed fundamental indicators, cautioning bullish traders.
Data released on Tuesday showed that Canada’s annual inflation rate rose unexpectedly to 2.0% in October, leading investors to scale back expectations of a significant rate cut by the Bank of Canada (BoC) in December. This has lent some support to the Canadian Dollar (CAD) and acted as a headwind for USD/CAD. However, subdued Crude Oil prices are capping any meaningful gains for the CAD, which is closely tied to commodity prices.
Despite concerns over potential supply disruptions from the Russia-Ukraine conflict, Crude Oil prices have failed to capitalize on a recent recovery. Data from the American Petroleum Institute (API) revealed that US inventories grew by 4.75 million barrels in the week ending November 15, significantly more than expected. This build-up in US stockpiles points to a greater supply of oil in the world’s largest producer, limiting upward momentum in prices.
Meanwhile, the US Dollar (USD) remains supported by growing expectations that President-elect Donald Trump’s policies will drive economic growth and reignite inflationary pressures. This outlook is expected to prevent significant rate cuts by the Federal Reserve (Fed), contributing to higher US Treasury yields and bolstering demand for the USD.
Looking ahead, investors are closely watching upcoming speeches by key Federal Open Market Committee (FOMC) members for clues on the Fed’s future rate-cut trajectory. These remarks will likely influence US bond yields and the USD later in the North American session. Additionally, traders will monitor the official US oil inventory data for further insights, which could influence Crude Oil prices and present short-term trading opportunities in USD/CAD.
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