USDCAD Price Analysis: Canadian Dollar Rallies Against US Peer

The USDCAD currency pair was trading down for the day as the Canadian dollar rallied against the US dollar amid a modest rebound in crude oil prices. The pair’s decline could also be attributed to broad US dollar weakness as many expect the Fed to change its monetary policy stance.

Investors were largely unimpressed by the upbeat US initial jobless claims data, which came in at 190,000 new claims beating analysts' expectations of 214,000 claims. The markets also ignored the upbeat Philadelphia Fed Manufacturing Index for January, which was recorded at -8.9, versus the expected -11.0 print and the previous figure of -13.7.

The upbeat US macro data has a minimal impact on the US dollar, which fell against most of its peers as markets remain convinced that the Fed will start moderating its rate hikes and may even reverse course and start lowering interest rates this year. 

However, opinions from Fed policymakers indicate that they are split on the way forward, with some members backing lower rate hikes. In contrast, others want the Fed to keep aggressive rate hikes until the economy stabilises. 

Still, recent data indicates that last year’s seven rate hikes from the Fed have the intended effect as US inflation is cooling, according to recent data. Meanwhile, the Canadian dollar was boosted by a slight increase in global crude oil prices, as tracked by the West Texas Intermediate (WTI). 

However, crude oil prices have fallen almost 50% from their March 2022 high, driven by concerns about the global economy's resilience since the start of the Russia-Ukraine war. The rate hikes by most Central Banks are threatening to derail the global economy, with most analysts expecting the world economy to enter a recession this year. 

There is a cost of living crisis in most European countries that used to depend on cheap Russian oil and gas to power their economies and have been forced to look for more expensive alternative energy sources. 

The US dollar is set to weaken against its peers if the Fed stops its rate hikes, but many other central banks will have no choice but to follow suit since many countries are struggling. 

*This is not investment advice. 

The USDCAD price chart.

The USDCAD currency pair was trading down 22.6 pips (0.17%) as the US dollar weakened against its Canadian peer.