USD/CAD recovers further from two-week low, climbs to mid-1.2800s ahead of Canadian CPI
- USD/CAD staged a goodish rebound from a two-week low touched on Wednesday amid a stronger USD.
- Aggressive Fed rate hike bets, rising US bond yields and recession fears underpinned the greenback.
- An uptick in oil prices failed to benefit the loonie or hinder the move ahead of the Canadian CPI report.
The USD/CAD pair maintained its bid tone through the first half of the European session and was last seen trading near the daily high, around the mid-1.2800s.
Having shown some resilience below the 1.2800 mark, the USD/CAD pair staged a goodish rebound from a near two-week low touched earlier this Wednesday and snapped a three-day losing streak. The uptick was sponsored by the emergence of some US dollar dip-buying and seemed rather unaffected by an uptick in crude oil prices, which tend to underpin the commodity-linked loonie.
Expectations that the Fed would need to take more drastic action to bring inflation under control assisted the USD to stall its recent corrective slide from a two-decade high. The bets were reinforced by Fed Chair Jerome Powell’s remarks at a Wall Street Journal event, saying that he will back interest rate increases until prices start falling back toward a healthy level.
The prospects for a more aggressive monetary policy tightening by the Fed pushed the yield on the benchmark 10-year US government bond closer to the 3.0% threshold. This, along with concerns about softening global growth, underpinned the safe-haven buck. Apart from this, some repositioning trade ahead of the Canadian CPI report acted as a tailwind for the USD/CAD pair.
From the US, the housing market data – Building Permits and Housing Starts – might do little to provide any meaningful impetus, leaving the USD at the mercy of the US bond yields and the broader risk sentiment. Traders will further take cues from oil price dynamics to grab short-term opportunities around the USD/CAD pair.