The US dollar has surged recently and registered significant gains against the Canadian dollar.
The day ahead will see trade balance and PMI figures for the countries and could lead to a further correction.
USDCAD – Daily Chart
USDCAD sits at 1.3800, with room for a correction towards 1.3200, depending on the data and headlines.
In Wednesday’s data release, Canada’s trade balance is expected to slow to C$3.45 billion from $4.05 billion. Non-manufacturing PMI figures for the US are expected to also slow to 56 from 56.9. The 50 number marks the difference between expansion and contraction, so it is still in growth territory.
The correction in the greenback has been driven by hopes for a pivot in the Fed’s aggressive rate hike strategy. A u-turn by the UK government on tax cuts for top earners has shown that central banks may not have room to continue hiking rates.
The CAD has also been boosted by a jump in oil prices after OPEC+ announced a production cut. However, US senator Dick Durbin was angered by a possible production cut to keep prices steady. Durbin said it doesn’t matter what the President or Congress does; they can’t catch up to the “greed” of oil producers.
“They’re determined to make a buck at our expense,” Durbin said.
Durbin wants more legal options to stop high fuel prices but doesn’t see any difference coming from Congressional hearings.
“If it’s just a hearing, why waste your time… we aren’t going to pass a law that’s going to have some strength in bringing down these prices.”
There had been a proposed oil price cap, but that could cause more problems than it solves. According to US Treasury estimates, the proposed cap on Russian oil could mean importers in emerging markets pay billions of dollars a year less for oil.
In the meantime, the Canadian dollar can try to catch a bid from higher oil and maybe some useful economic data. Friday will also be a big day for USDCAD, with employment figures released for both countries.
