- The USD/CAD pair jumps to 1.3735, as the Canadian Dollar weakens on the discouraging market sentiment.
- Investors are risk-averse as trading rules out the possibility of the Fed cutting rates in June.
- BoC Macklen sees expectations that the Fed will pivot to rate cuts in June as reasonable.
The pair USD/CAD advances towards 1.3750 in Friday's session in The asset Canadian dollar extends its winning streak for the third trading session, as investors see the Federal Reserve (Fed) pivoting towards rate cuts for the third quarter of this year.
Speculation about a rate cut by the Fed has eased as consumer price inflation in the United States became persistent in March. In addition, data from the underlying Producer Price Index (PPI), which shows the increase or decrease in prices of goods and services, excluding food and energy prices, by homeowners at the gates of factories, remain higher than expected. The annual core PPI grew 2.4%, compared to estimates of 2.3% and the previous reading of 2.0%.
For now, investors anticipate that the Fed could begin reducing interest rates after the September meeting. Additionally, investors expect two rate cuts instead of three, as Fed officials predict in the latest dot chart.
Fading expectations that the Fed will lower interest rates since the June meeting has diminished the attractiveness of risk-sensitive assets. S&P 500 futures have posted some losses in the European session. The US Dollar Index (DXY) extends its rise to 105.85. The scenario of the Fed keeping interest rates higher for longer bodes well for the US dollar.
As for the Canadian dollar, it has weakened due to strong market expectations that the Bank of Canada (BoC) will begin lowering interest rates in June. After maintaining the status quo on Wednesday, BoC Governor Tiff Macklem stated that a rate cut in June is possible.
Looking ahead, expectations of a further rebound in global oil prices due to escalating geopolitical tensions could provide support to the Canadian dollar. Fears of a confrontation between Iran and Israel increased after airstrikes by Israeli forces against the Iranian embassy in Damascus. Furthermore, Israel is preparing to invade Rafae, where displaced Palestinians have taken refuge.
It should be noted that Canada is the main exporter of oil to the United States, and the rise in oil prices supports the Canadian dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
