USD/CAD rebounds as the Canadian Dollar relinquishes earlier gains in the context of fluctuating Oil prices. BoC Governor Tiff Macklem indicates that additional rate hikes could be necessary due to ongoing inflation risks. Robust US employment figures bolster the US Dollar, as market participants anticipate the forthcoming Canadian and US labour statistics scheduled for release on Friday. USD/CAD regains ground on Tuesday as the Canadian Dollar surrenders earlier gains amid a firmer US Dollar and swings in Oil prices. Traders are evaluating the hawkish comments made by Bank of Canada Governor Tiff Macklem. At this time, the pair is trading at approximately 1.3993, showing minimal movement after rebounding from an intraday low of 1.3950.
Canada stands as a significant exporter of crude oil, rendering the Loonie particularly responsive to fluctuations in oil prices. Crude prices experienced an uptick earlier on Tuesday following a report regarding a US strike on Iran’s Qeshm Island. However, prices subsequently declined amid unverified reports suggesting that Washington and Tehran have reached concessions concerning Iran’s nuclear program and have frozen certain funds. West Texas Intermediate has since recovered some ground and trades flat around $95 a barrel. BoC Governor Macklem indicated that “further rate hikes may be needed,” while emphasising that future decisions would be made “meeting by meeting” in light of the heightened uncertainty observed during his parliamentary appearance. He observed that elevated oil prices and refinery margins are increasing expenses for consumers and businesses, with a greater portion of these costs anticipated to contribute to inflation in the upcoming year.
Macklem said CPI inflation is expected to rise to “3.5% by year-end,” remain “at or above 3% through much of 2027,” and return close to the BoC’s 2% target by mid-2028. Across the border, the US Dollar maintains its position in the face of uncertainty regarding US-Iran negotiations and a hawkish Federal Reserve outlook. Stronger-than-expected US jobs data provided a boost to the Greenback, yet traders exhibit caution in adopting aggressive positions in light of the upcoming US midterm elections.
JOLTS Job Openings increased to 7.523 million in September, up from 7.19 million, surpassing expectations of 7.13 million. The US Dollar Index, which tracks the currency against six major peers, is currently stable at approximately 101.80, having rebounded from an intraday low of 101.63. Attention now shifts to the employment reports scheduled for release on Friday from both nations. Canada’s Labour Force Survey and US Nonfarm Payrolls may influence expectations regarding the forthcoming actions of the BoC and Fed as traders evaluate the likelihood of additional rate increases in December.
