USD/CAD Faces Further Downside Pressure as Oil Strengthens Canadian Dollar
Federal Reserve Governor Michelle Bowman’s Weekend Remarks Reiterate Support for Policy Tightening
Robust Canadian Labor Market Data Bolster Hawkish Speculations Regarding the Bank of Canada (BoC)
The USD/CAD pair is primed for a potential decline toward the key psychological support level of 1.3600, driven by escalating Middle East tensions, particularly the Israel-Hamas conflict, which has propelled global oil prices higher. This surge in oil prices has bolstered the Canadian Dollar, exerting downward pressure on the pair.
Early in the New York trading session, S&P 500 futures recorded losses due to heightened geopolitical tensions, dampening overall market sentiment. In this risk-off environment, the demand for the US Dollar has surged as investors seek refuge in safe-haven assets.
While the US Dollar Index (DXY) has recovered to around 106.60, it faces resistance in extending its gains. The broader outlook for the USD Index remains bullish, fueled by risk-averse sentiment and mounting expectations of another interest rate hike, driven by robust labor market conditions and substantial wage growth.
Fed Governor Michelle Bowman reiterated over the weekend that the central bank deems further policy tightening appropriate. She expressed willingness to support an additional interest rate hike at an upcoming policy meeting if incoming data suggests that progress toward achieving a 2% inflation target has stalled.
On the Canadian Dollar front, strong labor market data for September has heightened the likelihood of an interest rate increase by the Bank of Canada (BoC). Canada added a remarkable 63.8K jobs in September, surpassing expectations of 20K and the previous figure of 39.9K. The Unemployment Rate held steady at 5.5%, defying expectations of a slight increase to 5.6%. Additionally, the annual wage growth rate accelerated to 5.3%, up from the previous 5.2% reading.