The US Dollar-Canadian Dollar (USD/CAD) exchange rate is pushing higher past 1.3450 as bullish traders keep the momentum going for the fourth consecutive day. This is due to a combination of factors, including the broad US Dollar strength, downbeat prices of WTI crude oil, dovish commentary from the Bank of Canada (BoC) officials, hawkish remarks from the Federal Reserve (Fed) policymakers, and upbeat US data.
The Canadian Dollar has been weakened by the dovish comments from BoC officials. BoC Deputy Governor Paul Beaudry mentioned that the floating Canadian Dollar gives the bank the flexibility to chart a different path than trading partners and focus on setting interest rates. This was echoed by BoC Governor Tiff Macklem, who said on Thursday that they have seen some evidence that their interest rate increases are starting to slow demand and rebalance the overheated economy.
On the other hand, the US Dollar has been bolstered by the hawkish remarks from Fed policymakers. Cleveland Fed President Loretta Mester repeated the previous defense of the highest rates, while St. Louis Federal Reserve’s James Bullard said that continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets.
The US data releases have also been positive for the US Dollar. The Producer Price Index (PPI) for January jumped the most since June with a 0.7% MoM figure, while Initial Jobless Claims for the week ended on February 10 came in at 194K versus 200K expected and 195K prior. Although Housing Starts for January and the Philadelphia Fed Manufacturing Survey for February were lower, they had a limited impact on the US Dollar.
The downbeat prices of WTI crude oil have been a drag on the Canadian Dollar. WTI crude oil is currently trading around $78.40, having pared the weekly losses. Since the Canadian economy is heavily reliant on WTI exports, the fall in the black gold’s price has been beneficial for the USD/CAD pair.
Geopolitical catalysts have also been driving the USD/CAD pair higher. The fresh US-China tensions and Russia’s refusal to back down from attacking Ukraine have weighed on the risk appetite, resulting in an increase in the US Dollar’s safe-haven demand. US President Joe Biden fired shots at his Chinese counterpart while conveying the expectations for a talk with the Chinese leader, during an interview with NBC News.
The US 10-year Treasury bond yields have risen to a fresh high since December 30, 2022, up 3.5 basis points to 3.87%. Similarly, two-year US Treasury bond yields have risen to the highest levels since November 2022, making rounds 4.65% at the latest. Wall Street closed negative and the S&P 500 Futures dropped 0.30% intraday.
In conclusion, the risk-off sentiment and hawkish Fed talks, versus the dovish BoC, have been keeping the USD/CAD pair firmer despite the Oil price weakness. On the technical front, USD/CAD has pierced the 50-day moving average (DMA) hurdle surrounding 1.3470 to aim for a two-week-old resistance line near 1.3480.