The USD/CAD pair is on a seven-day losing streak as global Oil prices boost the Canadian Dollar. The appeal for risk-sensitive assets is increasing as concerns about a US recession diminish. Investors are eagerly awaiting the US Inflation data for July to gain insight into interest rates.
West Texas Intermediate (WTI) futures on NYMEX have risen by over 5% in the last four trading sessions due to escalating geopolitical tensions and the temporary shutdown of Libya’s largest oil field, Sharara, amidst civil unrest. Conflicts in the Middle East between Iran and Israel are expected to intensify, impacting global Oil prices.
Canada, being a major exporter of Oil to the US, benefits from higher Oil prices, strengthening the Canadian Dollar. Market sentiment has improved as fears of a US recession subside, with S&P 500 futures showing gains. The US Dollar Index (DXY) is trading sideways above 103.00.
Upcoming US Consumer Price Index (CPI) data for July, set to be released on Wednesday, is expected to show a deceleration in annual headline and core inflation for the fourth consecutive month. This may lead to expectations of a significant interest-rate cut by the Federal Reserve (Fed).
Analysis:
The Canadian Dollar’s value is influenced by various factors, including interest rates set by the Bank of Canada, Oil prices, economic health, inflation, and trade balance. Higher Oil prices benefit Canada due to its significant Oil exports. Market sentiment and the US economy also impact the CAD. Inflation, economic data releases, and central bank policies can all affect the Canadian Dollar’s value. Understanding these factors can help individuals make informed decisions regarding their finances and investments.