The USD/CAD pair declined for the third consecutive session on Tuesday, trading around 1.3480 during early European hours. This drop can be attributed to the strengthening Canadian Dollar (CAD), bolstered by rising crude oil prices.
Crude oil prices have surged due to heightened concerns over potential supply disruptions. Fears of escalating conflict in the Middle East and the possible shutdown of Libyan oil fields have contributed to this rise. Additionally, Hamas has rejected new conditions proposed by Israel in the ongoing ceasefire talks in Egypt, demanding adherence to terms set by U.S. President Joe Biden and the UN Security Council.
Despite these tensions, U.S. Air Force General C.Q. Brown, chairman of the Joint Chiefs of Staff, noted to Reuters that concerns about a broader regional conflict have lessened. The recent exchange of fire between Israel and Hezbollah in Lebanon has not escalated further.
Oil prices have also been supported by growing expectations of U.S. interest rate cuts, which are anticipated to stimulate fuel demand. Lower borrowing costs are expected to boost economic activity in the U.S., the world’s largest oil consumer.
U.S. Federal Reserve Chairman Jerome Powell mentioned at the Jackson Hole Symposium on Friday that “The time has come for policy to adjust,” though he did not specify when or how large any potential rate cuts might be. The CME FedWatch Tool indicates that markets are fully expecting at least a 25 basis point rate cut by the Federal Reserve at its September meeting.
Related Topics:
