The USD/CAD pair is on a downward trend, currently trading around 1.3620 during the Asian session on Wednesday. Traders are showing caution as they await the release of the FOMC Meeting Minutes, with Fed Chair Jerome Powell’s speech at Jackson Hole also on the horizon.
Fed Governor Michelle Bowman’s recent comments expressing caution about potential policy changes, citing ongoing inflation risks, are adding to the market uncertainty. The probability of a Fed rate cut in September has decreased, based on the latest CME FedWatch Tool data.
Despite a dovish sentiment from the Bank of Canada, the Canadian dollar is strengthening. The CAD is holding its ground, even as crude oil prices decline. Recent Canadian economic data, including the Consumer Price Index, align with expectations and reinforce expectations for a dovish stance from the BoC.
Additionally, the ongoing situation in the Middle East, with hopes for a ceasefire, is impacting the price of West Texas Intermediate (WTI) oil. These geopolitical tensions are influencing market sentiment and contributing to the overall market caution.
Canadian Dollar FAQs
Key factors influencing the Canadian Dollar (CAD) include interest rates set by the Bank of Canada, oil prices, the health of the Canadian economy, inflation, and trade balance. Market sentiment, particularly related to risk appetite, also plays a role in CAD movements.
The Bank of Canada’s decisions on interest rates and monetary policy have a significant impact on the CAD. Additionally, oil prices, as Canada’s major export, directly influence the value of the Canadian dollar. Inflation, economic data releases, and global market conditions all contribute to the overall strength or weakness of the CAD.