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The Canadian dollar was weakened following Fed Chair Jerome Powell’s speech that indicated Fed’s commitment to fight inflation. The market’s reaction has sent the US dollar higher, while the US 2-year yield, the most sensitive to interest rate increases, climbed.
The USD/CAD pair is trimming some of Wednesday’s losses, climbing towards the 1.3100 area amidst a risk-on impulse, with most European and US equities rallying, despite further central bank tightening monetary conditions, with the latest ECB hiking 75 bps.
Unemployment claims in the US decelerated, fueling estimations that the labour market remains tight. Even though the BoC and Fed are tightening at the same pace, the safe-haven status of the US dollar will keep the USD/CAD under buying pressure.
During the overnight session, the USD/CAD began trading near the 1.3110s area and hovered around the 1.3100-1,3140 range before reaching the day’s highs at 1.3159. Nevertheless, it erased those gains and is currently trading at 1.3118, above its opening price by 0.01%.
The US Dollar Index gains 0.36%, up at 109.924, approaching the 110.000 psychological barriers, a tailwind for the USD/CAD. WTI crude recovers some ground at $83.28 per barrel, up 1.08%, putting a lid on USD/CAD gains.
