The USD/CAD currency pair is finding it challenging to establish significant momentum during the Asian session on Friday, trading around 1.3555 and hovering near a nearly two-week low reached the previous day.
The US Dollar (USD) is experiencing continued selling pressure for the second consecutive day, remaining close to its lowest level since July 2023. This decline follows the Federal Reserve’s substantial interest rate cut on Wednesday. Additionally, projections from Fed officials indicating a potential further reduction of 50 basis points in borrowing costs by year-end, coupled with a prevailing risk-on sentiment, is weighing heavily on the safe-haven Greenback, creating headwinds for the USD/CAD pair.
On the other hand, Crude Oil prices are consolidating their recent upward movement, achieving over a two-week high and poised for gains for a second straight week. This increase is driven by concerns over declining global stockpiles and escalating tensions in the Middle East, which bolster support for the commodity-linked Canadian Dollar (CAD). However, expectations of a dovish stance from the Bank of Canada (BoC) are helping to limit the downside for the USD/CAD pair.
Market participants are increasingly factoring in the possibility of a more pronounced 50 basis point rate cut from the BoC next month, following data that revealed Canada’s Consumer Price Index (CPI) recorded its smallest increase since February 2021, with core measures falling to a 40-month low. This backdrop is tempering bullish bets on the CAD, lending some support to the USD/CAD pair ahead of the release of Canada’s Retail Sales data on Friday.
Traders will also be attentive to BoC Governor Tiff Macklem’s speech later in the North American session, along with dynamics in Oil prices, which are expected to influence the CAD. Additionally, comments from Philadelphia Fed President Patrick Harker and overall risk sentiment will impact USD demand, potentially providing momentum for the USD/CAD pair. Nonetheless, the spot prices are on track to register losses for the first week in the last three.
