The USD/CAD pair remains under pressure, trading below the mid-1.4200s. This is due to a combination of factors that include a rebounding oil market and a weaker US dollar. The pair experienced an uptick during the Asian session, reaching the 1.4275-1.4280 region.
This was a one-and-a-half week high before drifting lower. As of now, the spot price of USD/CAD is around the 1.4245-1.4240 region. This reflects a decline of nearly 0.15% for the day due to fresh US Dollar (USD) selling.
Recent US macroeconomic data have fueled speculations about further interest rate cuts by the Federal Reserve this year. This includes the flash PMIs that showed a significant drop in business activity to a 17-month low in February. This situation has prevented the USD Index (DXY) from sustaining its overnight recovery from the lowest levels since December 10.
The DXY tracks the Greenback against a basket of other currencies. Meanwhile, oil prices have recovered, bolstering the commodity-linked Canadian Dollar (CAD).
Oil rebound impacts usd/cad trading
This has exerted downward pressure on the USD/CAD pair. Moreover, an uptick in Canadian consumer inflation has led investors to reconsider the likelihood of another interest rate cut by the Bank of Canada (BoC). This would be during its next policy meeting on March 12.
This has provided additional support to the CAD and further contributed to the negative tone surrounding USD/CAD. However, concerns about the potential economic fallout from US President Donald Trump’s trade tariffs might prevent the CAD bulls from placing aggressive bets. Trump confirmed on Monday that tariffs on Canadian and Mexican imports would proceed as planned on March 4.
Reciprocal tariffs on other countries would also go ahead. Looking ahead, traders will focus on the release of the Conference Board’s Consumer Confidence Index and the Richmond Manufacturing Index. They will also focus on speeches from influential Federal Open Market Committee (FOMC) members.
These events are expected to influence the USD and provide some momentum to the USD/CAD pair. Additionally, oil price dynamics will likely present short-term trading opportunities later during the US session.
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