The USD/CAD pair is on the rise for the second day in a row, currently trading around 1.3520 during the early European hours on Tuesday. This upward movement is driven by the strengthening US Dollar (USD) as the likelihood of a significant interest rate cut by the US Federal Reserve in September diminishes.
Traders are now eagerly awaiting the US ISM Manufacturing PMI data on Tuesday, along with upcoming US employment figures, to gauge the future direction of the USD/CAD pair. The recent increase in US Treasury yields is also providing support for the US Dollar, although the potential for a quarter-basis point rate cut by the Fed in September could limit its gains.
Despite the USD’s strength, the CAD, which is closely tied to commodity prices, is expected to see limited downside due to the surge in crude Oil prices. West Texas Intermediate (WTI) Oil has climbed to nearly $73.60 per barrel, fueled by concerns over supply disruptions in Libya. This increase in Oil prices is likely to support the CAD in the near term.
Looking ahead, all eyes are on the Bank of Canada’s interest rate decision scheduled for Wednesday. Market expectations suggest that the BoC will lower interest rates for the third consecutive time during its September meeting. Investors anticipate a quarter percentage point cut, with further reductions expected throughout the year and into 2025.
Analysis:
The USD/CAD pair is currently experiencing an uptrend, driven by the strengthening US Dollar and reduced expectations of a significant rate cut by the US Federal Reserve. The upcoming release of key economic data, along with the Bank of Canada’s interest rate decision, will play a crucial role in determining the future direction of the currency pair. Traders should closely monitor these developments to make informed investment decisions and manage their risk effectively.