- USD/CAD drifts lower on Monday and is weighed down by a combination of factors.
- Bullish Oil prices underpin the Loonie and exert pressure amid fresh USD selling.
- The downside seems cushioned ahead of this week’s key central bank event risks.
The USD/CAD pair attracts some sellers near the 1.3520 region on Monday and snaps a four-day winning streak. The pair is currently placed just below the 1.3500 psychological mark, down nearly 0.10% for the day, and is pressured by a combination of factors.
Crude Oil prices hold steady near a multi-month top touched last week in reaction to a new round of production cuts announced by the OPEC+, which, to a larger extent, overshadows concerns that weakening global growth may dent fuel demand. This, in turn, is seen underpinning the commodity-linked Loonie and exerting some downward pressure on the USD/CAD pair amid the emergence of some intraday selling around the US Dollar (USD).
In fact, the USD Index, which tracks the Greenback against a basket of currencies, surrenders its modest intraday gains amid the uncertainty over the Federal Reserve’s (Fed) rate hike path. The mostly upbeat US NFP released on Friday revived bets for another 25 bps lift-off at the next FOMC meeting in May. Market participants, however, seem convinced that the Fed will cut rates in the second half of the year amid signs of slowing economic growth.
Expectations that the Fed is nearly done with its policy tightening lead to a fresh leg down in the US Treasury bond yields, which continue to act as a headwind for the buck and prompt fresh selling around the USD/CAD pair. The downside, however, seems cushioned as traders might refrain from placing aggressive bets ahead of the key central bank event risks – the Bank of Canada policy meeting and the release of the FOMC meeting minutes on Wednesday.
This week’s US economic docket also features the release of the latest consumer inflation figures and monthly retail sales data, which will play a key role in influencing the USD and provide a fresh directional impetus to the USD/CAD pair. In the meantime, relatively thin liquidity conditions, in the wake of a holiday in most European markets, might hold back traders from placing aggressive bets and contributes to limiting losses for the major.