Usdcad Drops On Rising Crude Oil

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Usdcad Drops On Rising Crude Oil

Usd/Cad Drops To 1.3470 On Rising Crude Oil Prices

The USD/CAD is trading with a downward bias near the 1.3470 handle on Thursday, making it the 2nd consistent day in red.

It appears that the Canadian Dollar is enjoying a bullish run on account of higher crude oil prices. Additionally, the market sentiment is supporting a weaker US dollar, which works in favor of the Canadian dollar.

Wti Trades Near $81.70

If we look at the WTI, it is trading near the $81.70 handle, which bodes well for the CAD. Furthermore, the EIA has also announced a decline in its inventories for the 2nd week in a row. Since the USA is a major oil consumer, it is also supporting higher oil prices.

Meanwhile, the BoC is now also thinking about whether it should go with rate cuts in 2024, just like the rest of the central banks or not. However, there's still no agreement on this part, which means the CAD still has the upper hand against the greenback.

According to the BoC governor, they are still cautious when it comes to making any rate adjustments in the short-term. As for why they are adopting a cautious approach, the main concern is the inflation.

For now, the DXY is seen near 103.20 with a downward bias on account of weak bond yields. In fact, both the 2 and the 10-year bond yields have dropped, which shows a consistent downward pressure.

At Wednesday's meeting, the interest rate remains near 5.5%, with a forecast of a rate cut in the year 2024. According to the market sentiment, easing measures are now a done deal in the year 2024.

So, based on that, it appears that the USD/CAD's natural movement is towards the downside, as BoC is still unsure about the rate cuts.

If we look at the dot plot of FOMC, the interest rate by the end of the year 2026 will be near 3.1%. Earlier, the forecast for the interest rate was near 2.9%.

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