USD/CAD

The USD/CAD currency pair hovers near the significant level of 1.3500 as buyers and sellers contend with recent developments. On Friday morning in Europe, the Loonie pair reflects the cautious sentiment prevailing in the market ahead of upcoming key events.

Meanwhile, the US Dollar Index (DXY) experiences fluctuations at its highest levels in two months. This comes in light of reports suggesting the potential for the US House Freedom Caucus to obstruct any agreement to raise the $31.4 trillion debt ceiling.

Such reports magnify concerns about a potential US default, thereby motivating buyers of the DXY. Additionally, the US-Taiwan trade deal and scheduled meetings between China’s Commerce Minister Wang Wentao, USTR Tai, and US Commerce Secretary Gina Raimondo pose further challenges to the optimists.

Conversely, WTI crude oil gears up for its first weekly gain in five weeks, reaching $72.50 most recently. Notably, despite the DXY eyeing its second consecutive weekly gains, it fails to exert downward pressure on energy prices.

This can be attributed to hopes of increased commodity demand stemming from expectations of no US default and further easing measures in China.

In other news, the market’s confidence in a potential rate cut by the US Federal Reserve (Fed) in 2023 has dwindled, while the likelihood of a 0.25% rate hike in June has risen.

This shift in sentiment, coupled with robust US economic data and hawkish comments from Fed officials, has previously propelled the DXY.

Furthermore, concerns surrounding US policymakers’ ability to address default fears have supported USD/CAD and bolstered bullish sentiment towards the greenback.

Amidst these developments, S&P 500 Futures struggle to reach new yearly highs, showing modest gains near 4,220 after reaching levels not seen since August 2022 the previous day.

Similarly, stocks in the Asia-Pacific region demonstrate mixed performance, while the yields of the US 10-year and two-year Treasury bonds hesitate to extend their five-day upward trend at monthly highs.

Looking ahead, Canada’s Retail Sales for March, expected to decline by 1.4% MoM compared to the previous -0.2%, will precede a speech by Fed Chair Jerome Powell, which will likely influence intraday movements of USD/CAD.

However, the primary focus will be on US President Joe Biden’s press conference, expected to take place late on Sunday, addressing the extension of the debt ceiling.

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