The USD/CAD currency pair maintained its upward trajectory for the fourth consecutive session, trading near 1.4330 during Asian trading hours on Wednesday. The US Dollar continues to gain momentum, bolstered by rising US Treasury yields. At the time of writing, the US Dollar Index (DXY), which measures the greenback against a basket of six major currencies, stood just below 106.50. The 2-year and 10-year US Treasury yields surged to 4.13% and 4.33%, respectively.
On Tuesday, Federal Reserve Bank of Richmond President Thomas Barkin predicted a further decline in Personal Consumption Expenditure (PCE) inflation, pointing to the Fed’s considerable progress in curbing inflation. However, he emphasized the need for a cautious “wait and see” approach, given the prevailing uncertainties surrounding future monetary policy.
The Canadian Dollar (CAD) remains under pressure from multiple fronts. US President Donald Trump reaffirmed his stance on moving forward with tariffs on Canadian and Mexican imports, despite both countries’ efforts to bolster border security and address fentanyl trafficking. These tariffs are set to take effect ahead of the March 4 deadline. Trump further suggested that the US could do without Canadian crude oil and lumber, a remark that contradicts the long-standing trade relationship between the nations.
Compounding the CAD’s struggles are declining crude oil prices. As Canada is the largest oil exporter to the US, the drop in West Texas Intermediate (WTI) oil prices, now trading around $69 per barrel, continues to weigh on the Canadian currency. The outlook for oil prices is dampened by US economic concerns and broader market uncertainties affecting energy demand. Furthermore, President Trump’s foreign policy decisions, along with speculation about potential peace talks between Russia and Ukraine, could lead to the lifting of sanctions on Russia and an increase in Russian oil exports, further pressuring crude prices.
