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The USD/CAD pair is set to move higher, receiving significant support from the firmer US dollar on Monday. WTI crude is under pressure because Covid infection in China, and this is one factor that is knocking the Canadian dollar.
The USD/CAD pair is heading upside on Monday, partly as oil prices fall and the US dollar rallies against major rival currencies. The US Dollar is accumulating as investors kept their focus on the Fed’s interest rate hiking.
At the time of writing, the USD/CAD pair is trading at 1.3286, up 0.27% on the day having traded between a low of 1.3239 and 1.3309 so far. The US dollar index, DXY, is up some 0.2% having climbed from a low of 106.41 and reached a high of 107.27 so far, supported by comments from Federal Reserve Governor Christopher Waller. He said Friday’s inflation report was “just one data point,” and that markets are “way out in front”.
Key comments
Will need to see a run of CPI reports to take a foot off the brake.
Positive that goods prices came down with some moderation in services, but it needs to continue.
US policy rate is “not that high” given level of inflation.
Rate hikes so far has not “broken anything.
The US housing market needed to slow down.
Signal was to pay attention to the endpoint not the pace of rate increases, and until inflation slows the endpoint is “a ways out”.
Meanwhile, both US and Canadian government bond yields have been mixed following the Remembrance and Veterans Day holidays on Friday. In this regard, we will have the Canadian inflation data for October, due on Wednesday. This could offer clues on the Bank of Canada’s policy outlook. Money markets expect the central bank to raise interest rates by at least 25 basis points at its December 7 policy announcement.
Oil price has been falling since the start of the day. The reports of surging new Covid-19 infections in China, even after the country relaxed some of its quarantine policies last week, have dented the market’s stability. West Texas Intermediate crude is down some 3.3% falling from a high of $89.82 to a low of $85.68.
The drop came, as Reuters reports, following the news agency’s report that ”new Covid-19 infections were surging in Beijing and other cities even as the country, the world’s No.1 oil importer last week relaxed some of the Zero-Covid policies that shut-down major cities for weeks at a time, cutting in demand, while the new policies are seen as supportive for the country’s economy.”
