The USD/CAD pair has experienced a notable recovery, reaching close to 1.3440 during the early New York session. The Canadian dollar rebounded strongly from the support level near 1.3400, thanks to the US Dollar Index (DXY) displaying strength. The DXY showed a slight decrease in selling pressure after reaching a new daily high near 104.40.
The S&P 500 is expected to open with little change, influenced by the performance from the previous night. Volatility is anticipated due to the ongoing voting in Congress regarding the raise of the US debt ceiling. Despite the improving trade relationship between the United States and China, the overall market sentiment remains cautious.
In a recent report, Reuters highlighted that China’s Vice Foreign Minister and a senior US State Department official engaged in frank, constructive, and productive discussions on enhancing Sino-US relations and effectively managing differences.
The USD Index’s strong recovery has bolstered US Treasury yields, with the yield on 10-year US government bonds surpassing 3.7%.
Looking ahead, the focus will be on the interest rate decision made by the Bank of Canada (BoC). It is expected that BoC Governor Tiff Macklem will maintain interest rates at 4.5%, considering the steady decline in Canada’s inflationary pressures.
Canada’s inflation rate has already decreased from a recent high of 8.1% to 4.4%. Consequently, the BoC has the advantage of keeping interest rates stable.
Regarding oil, prices have found intermediate support around $70.00 following a sharp decline. The oil price may experience further downside as global central banks prepare for a new cycle of interest rate hikes.
It is important to note that Canada is the primary exporter of oil to the United States, and a recovery in oil prices could provide support for the Canadian dollar.
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