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USD/CAD Climbs Above 1.3600 As Oil's Lethargic Price Jostles With Banking And US Default Worries
The USD/CAD fluctuates around its highest level in a month, after reaching its highest level in seven weeks. The markets consolidate the previous day's movements prior to the release of crucial US data, as central banks work to restore confidence. Worrisome earnings from First Republic Bank and indecision regarding the U.S. debt ceiling underpin the latest Loonie appreciation. WTI nurses its wounds prior to the weekly report on Oil inventories.
The USD/CAD pair struggles to prolong its largest daily gains in seven weeks as it trades at 1.3620-30 in the early hours of Wednesday. In doing so, the Loonie pair appears to be taking cues from the latest halt in the Oil price decline, Canada's primary export, as well as the market's consolidation prior to the March Durable Goods Orders release. Buyers of the Loonie remain optimistic, particularly in light of the Bank of Canada's (BoC) dovish stance relative to the Federal Reserve's (Fed) hawkish stance.
The Loonie pair climbed to its greatest levels in a month the day before, as the US Dollar was buoyed by the widespread risk-off sentiment and largely positive US data. However, news reports regarding the First Republic Bank (FRB) and the US debt ceiling debate fueled risk aversion the day before, which supported the US Dollar's safe-haven demand and weighed on the WTI price.
Notable is that WTI crude oil remains under pressure near $77.00 after falling to its lowest level in three weeks on Tuesday. The latest pause in the black gold's decline may be attributable to the lethargic markets and cautious sentiment preceding the release of key US data and weekly Oil inventories by the US Energy Information Administration (EIA).
Wall Street closed in the red, while US Treasury bond yields remained negative, as the First Republic Bank's (FRB) disappointing earnings reports combined with the executives' reluctance to answer queries and lack of earnings guidance to provoke a new wave of banking anxiety. Nonetheless, the main central banks attempted to restore market confidence by reducing the US Dollar operations initiated during the initial phase of the banking crisis. "From May, the world's leading central banks will reduce the frequency of their dollar liquidity operations with the U.S. Federal Reserve, sending the clearest signal yet that last month's financial market volatility has largely subsided," reported Reuters.
As the current limit expires in June, concerns of the US debt ceiling expiring also impact on the appetite for risk. According to Reuters, US Treasury Secretary Janet Yellen warned that failure by Congress to raise the government's debt ceiling would result in a "economic catastrophe" that would cause interest rates to rise for years.
Notably, generally optimistic US data also favored USD/CAD purchasers. Tuesday, the US Conference Board's Consumer Confidence Index decreased to 101.3 from 104.0 in March. The Present Situation Index increased to 151.1 from 148.9 during the specified month, while the Consumer Expectations Index decreased to 68.1 from 74 prior readings. In addition, consumer inflation expectations for one year decreased to 6.2% in April from 6.3% in March. In a separate report, US New Home Sales increased to 0.68 million month-over-month in March, compared to 0.63 million expected and 0.62 million revised previously, while the S&P/Case-Shiller Home Price Indices and Housing Price Index both exceeded market expectations in February, rising 0.4% and 0.5% respectively.
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