The USD/CAD is Depressed Near 1.3300 As Oil Prices Continue to Rise, While OPEC+ and the Federal Reserve are in the Spotlight

EnclaveFX Ltd
Feb 01, 2023
  • In the wake of a week-long decline, USD/CAD licks its wounds.
  • Markets prepare for OPEC+ verdict despite softer US Dollars.
  • In order to entice buyers of the Loonie pair, US data has softened and yields have increased.
  • PMIs may provide intermediate guidance while Canada's GDP remained unimpressive.

After reversing from a one-week high the previous day, USD/CAD remains defensive at around 1.3310 amid sluggish markets.

Before the Federal Open Market Committee (FOMC) meeting on monetary policy, the Loonie pair is showing caution. A challenge to the quote is the traders' anxiety in advance of the Joint Ministerial Monitoring Committee (JMMC) of the Organization of Petroleum Exporting Countries (OPEC) and its allies led by Russia.

Following a strong reversal from the three-week low on Tuesday, WTI crude oil, Canada’s main export earner, moves above $79.00. The OPEC+ JMMC has already lowered the odds that any change will occur in the previous verdict favoring the reduction of supply from major producers has already been made by Reuters.

In contrast, the US Dollar Index (DXY) remains indecisive after reversing from a high of one week as a preview of the US inflation-printing downbeat figures. The US Employment Cost Index (ECI) for the fourth quarter (Q4), however, declined to 1.0% against market expectations of 1.1%, and prior readings of 1.2%. Moreover, the Conference Board (CB) It should also be noted that no significant attention was paid to the US Chicago Purchasing Managers' Index (PMI) for January, which rose to As expected, the Chicago Purchasing Managers' Index rose to 44.3 versus 41 expected and 44.9 in previous readings. Consumer Confidence slipped to 107.10, from 108.3. The Chicago Consumer Confidence Index increased to 107.10 from 108.3. The Chicago Consumer Confidence Index slipped to 107.10 from 108.3 in December.

On the domestic front, the Canadian Gross Domestic Product (GDP) for November increased by 0.1% on a month-over-month basis, matching October's expansion of 0.1%, but exceeding the market's expectation of 0%.

It should be noted that the pre-event cautiousness coincides with China’s Consecutive sixth below 50.0 print of the Caixin Manufacturing PMI, which probes the Oil price and puts a floor under the USD/CAD exchange rate. Additionally, mildly offered S&P 500 Futures present an additional challenge for the Loonie pair sellers.

As a result, downbeat yields pose a challenge to the bulls of the US Dollar ahead of Wednesday's key event. The benchmark 10-year US Treasury bond yield remains low near 3.51%, sustaining the move made the previous day.

In the coming months, dovish Fed policy coupled with an unimpressive OPEC+ meeting is likely to keep USD/CAD bears hopeful. The monthly PMI data for the US and Canada will also be important.


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