The USD/CAD currency pair is on the verge of reaching the immediate resistance level at 1.3280 during the London session. The Canadian dollar is gaining strength as the US Dollar Index (DXY) finds support after a correction to around 103.11.
In Europe, S&P500 futures have made slight gains, indicating a positive sentiment towards risk appetite. Investors are optimistic, expecting only one more interest rate hike before the end of the year. The US Dollar Index (DXY) is poised to complete its corrective phase and resume its upward trajectory towards today’s high of 103.24.
Despite dovish comments from Atlanta Fed Bank President Raphael Bostic, the strength of the USD Index remains unaffected. Bostic suggests that the central bank has already implemented sufficiently restrictive interest rates to curb inflation and recommends a pause to prevent adverse effects on economic activities.
Investors are eagerly awaiting the release of the Manufacturing PMI by the ISM department at 14:00 GMT to gain better insights into the economic conditions in the United States. The expectation is for an increase in the economic data, with the PMI projected to reach 47.2 compared to the previous release of 46.9. US factory activities have been in a contraction phase for the past seven months.
Additionally, market participants will closely monitor the US factory orders index, which is expected to rise to 44.0 from the previous release of 42.6.
On the Canadian dollar front, softening inflation and signs of weakness in employment numbers have increased the likelihood of the Bank of Canada (BoC) pausing its policy-tightening measures. It is important to note that BoC Governor Tiff Macklem has already raised interest rates to 4.75%.
Oil prices have undergone a corrective phase after reaching around $71.60. However, they are expected to resume their upward trend as Saudi Arabia’s Ministry of Energy announced an extension of its crude production cut for an additional month, as reported by Newswires.
It is worth highlighting that Canada is the largest exporter of oil to the United States, and higher oil prices would provide support for the Canadian dollar.
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