The USD/CAD pair exhibited modest upward movement on Monday, hovering just below the mid-1.3700s as trading commenced for the week. Despite initial dip-buying interest, the pair struggled to break out of its recent range, reflecting a cautious market sentiment influenced by various factors.
One significant influence has been the fluctuation in crude oil prices, which declined today following last week’s robust gains. This decline raises concerns about weakened US consumer demand, impacting the commodity-linked Canadian Dollar (CAD).
Conversely, the US Dollar (USD) maintained stability near recent highs reached post-Federal Reserve’s unexpectedly hawkish stance last Friday. The Fed‘s revised outlook, anticipating a single rate cut in 2024, has bolstered the USD, acting as a supportive factor for the USD/CAD pair.
Recent economic indicators from the US, including softer-than-expected consumer and producer prices data, suggest a potential easing of inflationary pressures. This, coupled with a decline in US import prices and a notable drop in consumer sentiment, keeps the possibility of a Fed rate cut in September viable. Such expectations temper bullish enthusiasm for the USD, potentially capping upside movements in the USD/CAD pair.
Looking ahead, market participants await key economic releases such as Canadian Housing Starts data and the US Empire State Manufacturing Index later in the North American session. These data points, combined with ongoing oil price developments, are expected to guide short-term trading strategies around the USD/CAD pair. As volatility persists, a cautious approach may be prudent until clearer directional signals emerge in the currency markets.
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