- USD/CAD breaks two consecutive weeks of gains and falls 0.85% weekly.
- Rising oil prices and upbeat sentiment coupled with a weaker dollar are buoying the CAD.
- Bullard of the Federal Reserve commented that fears of a recession in the United States are exaggerated; the FFR is expected to end at 3.5%.
The USD/CAD down from daily highs around 1.3000 to end the week with losses amid an upbeat market environment as traders have scaled back aggressive US Federal Reserve tightening. At the time of writing, the USD/CAD is trading at 1.2914.
Positive Mood and Rising Oil Prices Support CAD
Global equities are rising, reflecting an upbeat mood on Friday. Recession fears surround the markets, but despite the above, investors are beginning to price in “possible” interest rate cuts in 2023, which seems too early to predict what will happen to the economy.
Meanwhile, USD/CAD is falling as investors price in interest rate hikes from the Fed. As a result, US Treasury yields fell, thus increasing demand for the greenback. went down. Additionally, rising US crude prices, with Western Texas Intermediate (WTI) snapping two days of losses, rising 3.68% to $108.14 BPD, fuels the Loonie, a headwind. for USD/CAD.
The US Dollar Index (DXY), which measures the value of the USD against some currencies, is down 0.24% at 104.149. If we take a look at the daily chart of the DXY, the index is consolidating and forming an ascending triangle, which threatens to push the DXY higher.
Meanwhile, the Fed speech continued, now with St. Louis Fed President James Bullard taking a stand. Louis. He said fears of a US recession are overblown. Bullard stated that the US will be fine and that the policy tightening will slow the economy to a trend growth rate. He reiterated that the Federal Funds Rate (FFR) should be at 3.5% this year.
On Wednesday, Bank of Canada Senior Deputy Governor Carolyn Rogers said May’s inflation data was an unwelcome but not unexpected number. When she was asked about the 75 basis point rate hike, she commented that the decision would not be made until July.
As for the data, the Canadian calendar revealed average weekly earnings for April, which rose 4%, down from the previous reading. In the United States, the economic docket included the UoM Consumer Sentiment in its final reading for June, which fell to 50.
Technical levels
Source: Fx Street
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