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USDCAD attempts to construct a position above 1.3350 as oil bids near $85.00
Despite a resurgence in risk-on sentiment, USDCAD aims to shift its business over 1.3350. As of CY2022, Fed's George foresees a slowing in the Fed's rate hike pace, which is likely to weigh on long-term US yields. Oil prices are declining due to an increase in Covid-19 cases in China and the absence of new penalties against Russia.
In Asia, the USDCAD pair is exhibiting a decrease in volatility in a range of 1.3314-1.3345 following a vertical rebound from crucial support near 1.3230. As oil prices have been under to extreme pressure, the asset is hovering near its weekly peak and aiming to add to its gains. Contrary to USDCAD bullish wagers, optimistic market sentiment is regaining momentum.
S&P500 futures are rebounding following Wednesday's losses. As FMCG-to-retail chain operator Target Corporation (NYSE:TGT) projected a dismal prognosis for consumer spending, the 500-stock index declined. Following a slight rebound from 106.20, the US dollar index (DXY) is exhibiting a lackluster performance. As clouds of uncertainty have dissipated, the Russia-Poland-led surge in the DXY could conclude.
In the meantime, the yields on 10-year US Treasuries have returned modestly to around 3.71 percent after falling below 3.7% earlier. As the probability of a fifth consecutive 75 basis point (bps) rate hike by the Federal Reserve (Fed) is exceedingly low, the downturn appears less assured. According to the CME FedWatch tool, the probability of a 75 basis point rate hike is 17%.
President of the Federal Reserve Bank of Kansas City Esther George's remarks have bolstered the case for a recession to moderate inflationary pressures. In an interview with the Wall Street Journal, a Fed policymaker claimed that it may not be possible to reduce inflation without triggering a recession. He also argued for a reduction in the rate of rate hikes beginning in CY2022.
On the Loonie front, falling oil prices have contributed to currency instability. As the number of infected patients skyrockets, China's easing of Covid-19 restrictions has been unable to boost oil prices. In addition, clarity on the Russia-Poland dispute has diminished the likelihood of the trading bloc imposing quick penalties on Russia.
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