The USD/CAD pair has halted its two-day rally, trading at approximately 1.4370 during the Asian trading hours on Thursday. This downside correction in the pair is mainly attributed to a retreat in the US Dollar, following its recent surge. The US Dollar Index (DXY), which measures the US Dollar’s strength against six major currencies, is currently trading at around 108.30. This comes after the DXY pulled back from its multi-year high of 108.58, which was reached earlier this week.
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US Federal Reserve Signals Cautious Approach on Rate Cuts in 2025
The Federal Reserve is likely to adopt a more cautious stance on rate cuts in 2025, which could have significant implications for the US Dollar. This shift in policy comes amid growing uncertainty regarding the potential economic strategies of the incoming Trump administration. As market participants closely monitor these developments, the outlook for the US Dollar remains uncertain, contributing to the recent pullback in the USD/CAD pair.
Canadian Dollar Strengthened by Rising Crude Oil Prices
The Canadian Dollar (CAD) is receiving a boost as crude oil prices continue to strengthen. As Canada is the largest oil exporter to the United States, the positive movement in oil prices directly benefits the CAD. West Texas Intermediate (WTI) crude has extended its gains for the fifth consecutive day, currently trading around $71.70 per barrel at the time of writing. This uptick in oil prices is expected to provide further support to the Canadian currency in the near term.
Oil Prices Gain Momentum as China’s Economic Recovery Takes Shape
Oil prices have started the New Year 2025 on a positive note, driven by investor optimism surrounding China’s economic recovery and the potential boost in fuel demand. This optimism follows a pledge from President Xi Jinping to implement more proactive policies aimed at stimulating growth in 2025. As China continues to recover, global demand for oil is expected to rise, further supporting the Canadian Dollar.
Economists Predict Further Decline for Canadian Dollar Amid Downward Trend
USD/CAD Price Outlook Key Resistance Emerges Above 1.4450
Canadian Dollar Steady as Benchmark Yield Declines
Canadian Dollar Finds Modest Support Amid Holiday-Thinned Market Activity
Canadian Dollar Forecast USD/CAD Trends into 2025 as Trump Tariff Risks Emerge
Upcoming Economic Data to Watch: Jobless Claims and PMI Reports
Looking ahead, key economic data will be released later in the North American session, including the US weekly Initial Jobless Claims and the S&P Global Manufacturing PMI for December. These reports could provide further insight into the health of the US economy, potentially influencing both the US Dollar and the USD/CAD pair.
In conclusion, the USD/CAD pair is experiencing a short-term pullback due to a weakening US Dollar and rising crude oil prices. As investors await economic data releases, market participants will closely monitor developments surrounding the Federal Reserve’s monetary policy and global oil markets.
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