USD/CAD Falls Toward 1.3750 Due To Higher Oil Prices

 Photo by Michelle Spollen on Unsplash

  • USD/CAD depreciates as commodity-linked CAD improves due to rising Oil prices.
  • WTI Oil price edges higher due to supply threat amid escalated geopolitical tensions in the Middle East.
  • The US Dollar may struggle due to dovish remarks from the Fed officials.

USD/CAD extends losses for the second consecutive day, trading around 1.3780 during the early European session on Wednesday. The Canadian Dollar (CAD) gains strength due to rising crude prices, as Canada is the largest Oil exporter to the United States. This increase in Oil prices puts pressure on the USD/CAD pair.

West Texas Intermediate (WTI) Oil price inches higher to near $82.80 per barrel at the time of writing. This upside could be attributed to the supply threat, which arises due to the geopolitical tensions persisting in the Middle East. Israel intensifies its operations in Gaza, prompting Palestinians to evacuate Khan Younis amid fears of further attacks. Israeli forces conducted airstrikes across the southern Gaza Strip on Tuesday, leading to widespread displacement among Palestinians.

The Canadian S&P Global Manufacturing PMI held steady at 49.3 in June, falling short of the market expectation of 50.2. This marks the 14th consecutive month of contraction. Traders will likely keep a close eye on the Canadian Unemployment Rate, set to be released on Friday, which is expected to increase to 6.3% in June.

The US Dollar (USD) could struggle due to Federal Reserve (Fed) Chair Jerome Powell’s somewhat dovish remarks on Tuesday. Powell said that the Fed is getting back on the disinflationary path. However, Powell wants to see further evidence before cutting interest rates as the US economy and the labor market remain strong, per Reuters.

Additionally, Chicago Federal Reserve Bank President Austan Goolsbee cautioned on Tuesday during an interview with CNBC, stating, "I see some warning signs that the real economy is weakening." Goolsbee further mentioned that progress toward the Fed's 2% inflation target could accelerate more swiftly than anticipated.

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