The USD/CAD pair has paused its two-day rally, trading around 1.4370 during Thursday’s Asian session. This decline can be attributed to a correction in the US Dollar, with the US Dollar Index (DXY), which tracks the USD against six major currencies, retreating to 108.30 after reaching a multi-year high of 108.58 on Tuesday.
The Federal Reserve may take a more cautious stance on further rate cuts in 2025, signaling a shift in its monetary policy approach. This adjustment comes amid uncertainties surrounding potential policy changes under the incoming Trump administration, which may influence the central bank‘s future decisions.
Meanwhile, the Canadian Dollar (CAD) is benefiting from stronger crude oil prices, as Canada remains the largest oil exporter to the United States. West Texas Intermediate (WTI) crude prices have continued their upward trend for the fifth consecutive day, trading at $71.70 per barrel as of the latest update.
Oil prices are starting the new year on a positive note, fueled by investor optimism about a potential recovery in China’s economy and its fuel demand. Chinese President Xi Jinping pledged to implement more proactive policies to foster growth in 2025, which further boosted sentiment, according to Reuters.
Looking ahead, key US economic data, including weekly Initial Jobless Claims and the S&P Global Manufacturing PMI for December, are expected later in the North American session, potentially influencing the USD/CAD pair’s next move.
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