The USD/CAD exchange rate has recently moved up to approximately 1.3500, driven by lower crude oil prices impacting the commodity-linked Canadian Dollar (CAD). This rise follows a period of recent declines for the pair.
Key Factors Influencing USD/CAD:
Lower Oil Prices: West Texas Intermediate (WTI) crude oil prices have fallen for the second consecutive session, trading around $72.50 per barrel. This decline is attributed to the planned increase in oil production by OPEC+ members. Starting in October, eight OPEC+ countries are set to raise their output by 180,000 barrels per day. This move is part of a broader strategy to gradually reverse the recent reduction of 2.2 million barrels per day while maintaining other cuts until the end of 2025.
US Dollar Strength: The US Dollar (USD) gained support following the release of July’s Personal Consumption Expenditures (PCE) Index data. The data led to a reduction in market expectations for a more aggressive rate cut by the Federal Reserve in September. The CME FedWatch Tool currently indicates that markets are fully expecting a 25 basis point rate cut at the Fed’s September meeting.
Upcoming Economic Data: Market participants are now focused on upcoming US employment figures, including August’s Nonfarm Payrolls (NFP), to gauge potential future moves by the Fed. Additionally, the Canadian S&P Global Manufacturing PMI scheduled for Tuesday will be closely watched for insights into the Canadian economy.
Overall, the combination of lower oil prices and US dollar strength has contributed to the USD/CAD pair’s rise, as the CAD faces challenges due to its correlation with commodity prices.
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