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USD/CAD Declines Towards 1.3400 On The Back Of a Stronger Oil price, With Eyes On Fed's Powell and BoC's Mackem
The USD/CAD reverses a three-day rise and retreats from its two-week peak. The market's cautious optimism permits WTI crude oil to maintain its strength. After Fed's dissatisfaction last week, the US Dollar declines amidst concerns regarding Powell's address. Macklem must justify the hawkish leaning in order to satisfy bears.
USD/CAD maintains losses near the intraday low with the first negative daily performance in four days, trading near 1.3430 on Tuesday morning. Despite this, the Loonie pair remains near the highest levels in 12 days as traders await remarks from Governor Tiff Macklem of the Bank of Canada (BoC) and Chairman Jerome Powell of the Federal Reserve (Fed).
The recent depreciation of the quotation may be attributable to the market's cautious optimism in the face of diminishing recession fears. The firmer prices of WTI crude oil, Canada's primary export commodity, could add to the strength of the downturn.
In spite of this, WTI crude oil increases 0.40 percent to $75.00, extending yesterday's recovery from a two-month low. The recovery of the price of black gold may be attributable to easing fears of a US economic slowdown, as well as recent positive news reports regarding Sino-American relations.
Although the US economic calendar was largely silent, the US Treasury Secretary Janet Yellen and President Joe Biden's growth confidence appeared to have weighed on the US Dollar bulls. Nonetheless, hawkish Fed discussions appear to support US Treasury bond yields and the US Dollar. In an interview with Bloomberg, Federal Reserve Bank of Atlanta President Raphael Bostic stated, "The robust job market presumably suggests 'we have a bit more work to do.'"
Elsewhere, a dash on the US diplomatic visit to Beijing and China’s angry reaction to the US shooting down its balloon by terming it a spying attempt prompted the market’s risk-off mentality and boosted the USD/CAD pair the previous day. The most recent remarks by US President Joe Biden appear to be reassuring, as he stated, "The balloon incident does not harm US-China ties."
After a two-day comeback from the monthly low, the US 10-year Treasury bond fought for direction around 3.63%, while S&P 500 Futures posted modest gains that reflected the prevailing sentiment.
In addition, optimistic readings of the Canada Ivey Purchasing Managers Index for January, 60.1, compared to 55.2 predicted and 49.1 previously, appear to impose downward pressure on the USD/CAD exchange rate.
In the future, USD/CAD traders may respond immediately to the Canadian trade data for December. However, remarks from the Bank of Canada's Macklem, the Federal Reserve's Powell, and US President Joe Biden's State of the Union (SOTU) address will be critical for establishing clear instructions.
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