The USD/CAD pair has recovered from its intraday low of 1.3485, benefiting from a rebound in the US Dollar and a decline in oil prices early on Tuesday in Europe. However, the pair remains uncertain around the 1.3500 level at the moment.
By the current press time, the US Dollar Index (DXY) is steadily rising to around 103.30, maintaining its two-day upward trend. As a result, the USD/CAD pair faces the impact of a stronger US Dollar, despite the absence of a deal to avoid the debt ceiling expiration during recent negotiations between US President Joe Biden and House Speaker Kevin McCarthy.
In addition to concerns over the US debt ceiling, the growing probability of a 0.25% interest rate hike by the Federal Reserve (Fed) in June and the expectation of no rate cuts in 2023, compared to the Bank of Canada’s (BoC) dovish stance, are also providing optimism for USD/CAD bulls.
Conversely, the price of WTI crude oil has retreated to $72.00, reversing the gains seen at the beginning of the week. This decline can be attributed to the stronger US Dollar and the anticipation that geopolitical tensions involving Russia and China, along with the expectation of a hawkish central bank, may impact the economic transition and energy demand.
However, it should be noted that the weakness in oil prices is limited due to the International Energy Agency’s (IEA) projections of a decrease in oil supplies by nearly 2 million barrels per day (bpd) in the second half (H2) of this year.
Meanwhile, the S&P 500 Futures exhibit a mild upward trend, trading near 4,210 and marking the second consecutive day of gains following Friday’s pullback from a nine-month high.
The positive performance of US stock futures, along with a moderately positive Wall Street performance, has resulted in the benchmark 10-year and two-year US Treasury bond yields pausing their five-day uptrend, which had reached the highest levels in two months.
Looking ahead, USD/CAD traders will likely find interest in the US S&P Global PMIs for May and Canadian Industrial Production figures for April as full market activity resumes. Additionally, it will be important to monitor the weekly oil inventories and updates related to the US debt ceiling.
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