- The Loonie weakened on the week, weighed down by the strength of the dollar and the drop in energy prices.
- Global stocks fell, illustrating a subdued market mood courtesy of recession fears and China’s Covid-19 outbreak.
- USD/CAD traders brace for June FOMC monetary policy minutes.
The USD/CAD rose for the second day in a row, extending its weekly gains to nearly 1.50%, courtesy of a buoyant rising dollar and falling crude prices. At the time of writing, USD/CAD is trading at 1.3066, albeit in positive territory, far from the yearly high around 1.3083.
USD/CAD falls on risk-off sentiment, dollar strength and falling oil prices
Sentiment remains negative as USD/CAD traders prepare to digest the Federal Reserve Open Market Committee (FOMC) June minutes. During the New York session, the US Composite and Services PMI indices, released by S&P Global and the Institute for Supply Management (ISM), beat expectations but fell short of May’s reading, which illustrates that the US economy is slowing down. In addition, fears of a global recession and the new coronavirus crisis in China are keeping global equities under pressure, US Treasury yields rising and the US dollar rising.
The dollar index gains 0.66% and stands at 107.194, supported by high US Treasury yields. By contrast, US benchmark oil WTI falls 2.74% on the day, trading at $96.62 a barrel, a tailwind for the major.
That said, investors’ eyes are focused on the Fed. Although it is often an overhyped development, any clues the US central bank could provide regarding futures guidance would be greatly appreciated by investors.
Meanwhile, money market futures began to show that traders expect the Fed to cut rates in mid-2023. Investors are forecasting a 75 basis point rate hike for the July meeting, with futures markets showing that the Federal Funds Rate (FFR) will peak at 3.25% before relaxing to 3.04% in June 2023.
In the coming week, the Canadian docket will include May’s trade balance, exports and imports. In the US, the economic calendar will feature Fed members Christopher Waller and James Bullard, initial US jobless claims and non-farm payrolls.
USD/CAD Key Technical Levels
Source: Fx Street
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