USDCAD Keeps Calm Amidst Dollar Strength

USDCAD keeps calm amidst dollar strength. The market pair was steady at the beginning of Monday, trading around the 1.33640 significant level, as the US Dollar showed middling resilience. The pair recovered from a dip to the 1.3340 area, thanks to dip-buying activity. The Canadian Dollar was weighed down by softer crude oil prices, which gave a boost to the USD/CAD pair. Meanwhile, the greenback was limited by expectations of a pause in the Federal Reserve’s rate hike cycle. Looking ahead, the USD/CAD pair could be sensitive to the broad risk trends and the US-China trade tensions. 

BoC Thread Caution 

The release of significant US economic data, such as Non-Farm Payrolls and ISM Manufacturing PMI, could also have an impact on the pair. On the Canadian side, investors will be monitoring the release of key economic data, such as the GDP, retail sales, and trade balance figures. In addition, investors will also be keeping an eye on the Bank of Canada’s monetary policy decisions, and the rhetoric of the central bank’s officials. This could give some direction to the pair, as the BoC is likely to remain cautious in the face of sluggish growth and rising trade tensions. Finally, the performance of the crude oil markets could also influence the USD/CAD pair, as oil is an important commodity for the Canadian economy.

The market is showing signs that inflation expectations are on the rise. The University of Michigan’s preliminary report revealed that inflation expectations rose to 4.6% in April, despite recent gains in the US dollar. This has generated speculation that the Federal Reserve may continue to raise interest rates, as hawkish comments by Fed officials have provided further evidence of this. As a result, US Treasury bond yields have risen, providing some support to the greenback. However, despite the expected rate hikes, there are indicators that the Fed may decide to pause its rate-hiking cycle sooner rather than later.

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