USD/CAD Falls Below 1.4200 Amid Fed Rate Cut Speculation and Weak Oil Prices

The USD/CAD has fallen under the 1.4200 Mark due to increasing speculation about a rate cut by the Federal Reserve putting pressure on the dollar.

The USD/CAD pair dropped below 1.4200 in the session on Monday due to the US dollar and economic uncertainties in Canada which contributed to the decline as markets anticipate a potential interest rate cut by the Federal Reserve following disappointing US economic data.

There were indications of a decrease in US claims and the S&P Global Purchasing Managers’ Index (PMI) causing a drop in the US Dollar Index (DXY) towards the 106-level mark downwardly. Meanwhile, the pressure persisted on Treasury yields with the 2-year rates at 4⋅19% and 10-year rates standing at 4⋅43%.

Canada’s economic performance had some indicators recently; Retail sales decreased by 0.4% in January after seven months of growth. This decline has sparked worries about consumer spending trends. At the time, there are concerns about rising inflationary pressures as both industrial producer prices and the Raw Materials Price Index show a slight uptick. This scenario poses a challenge for the Bank of Canada as it grapples with managing inflation while maintaining stability.

The Canadian dollar faced challenges with the weakening of crude oil prices due to a drop in WTI crude following expectations of increased oil exports from Kurdistan and Iraq’s plan to export 1850 barrels per day via the Iraq-Turkey pipeline could contribute to pressure on oil prices given Canada’s significant role as an oil supplier to the US which typically leads to a decline in the Canadian dollar when crude prices are low.

Traders will be keeping an eye on the US economic reports and statements from the Fed as any change in monetary policy expectations might lead to additional fluctuations in USD/CAD trading.