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USD/CAD falls to near 1.3700 amid higher crude Oil prices, risk-on mood

  • USD/CAD gained ground as the US Dollar struggled after Fed Powell dismissed the speculation of further rate hikes.
  • The improved market sentiment supports risk-sensitive currencies like the Canadian Dollar.
  • The uptick in the WTI price supported the CAD as Canada is the largest Oil exporter.

USD/CAD extends its losses for the second successive day, hovering around 1.3710 during the European session on Thursday. This improved risk appetite supports risk-sensitive currencies like the Canadian Dollar (CAD), consequently, undermining the USD/CAD pair.

On Wednesday, the Federal Reserve (Fed) decided to maintain interest rates at the range of 5.25%-5.50% in May’s meeting, as highly expected. Additionally, the US Dollar (USD) faced challenges after Federal Reserve Chairman Jerome Powell dismissed the likelihood of a further interest rate hike during the Federal Open Market Committee (FOMC) conference, as per a Reuters report.

Fed Chair Powell emphasized that progress on inflation has recently stalled, indicating that it would require more time than previously anticipated for the Fed to be confident in reaching its 2% target. Powell suggested that if strong hiring continues and inflation remains subdued, it would warrant delaying rate cuts.

In Canada, according to a Reuters report on Wednesday, Bank of Canada (BoC) Governor Tiff Macklem said that the BoC is reaching a point where it could begin reducing interest rates from their current 23-year highs. Speaking to the Senate Banking Committee, Macklem mentioned that inflation was declining and Canadians were eager to know when the central bank would initiate interest rate cuts.

Additionally, the uptick in crude Oil prices supported the Loonie Dollar as Canada is the largest oil exporter to the United States (US). West Texas Intermediate (WTI) Oil price inches higher to near $79.30 per barrel, by the press time. The prices of crude Oil have rebounded on the anticipation that lower levels could encourage the United States, the world’s largest crude consumer, to begin replenishing its strategic reserve.