Loonie Rides Oil Price Surge Amid US Tariff Pause
The Canadian Dollar remains supported by rising oil prices and a pause in US tariffs. USD/CAD is trading around 1.3778, down 0.22% on the day. The Loonie benefits from higher oil prices due to Canada's significant crude exports. West Texas Intermediate trades at $85.80 per barrel, up nearly 5% this week.
US President Donald Trump has temporarily halted planned tariffs on Canadian goods worth around $20 billion, citing progress in trade talks. This development adds to the Canadian Dollar's strength. The USD fell to a three-month low on Wednesday after the US Treasury announced larger buybacks of government securities, pushing long-term yields lower.
However, yields rebounded on Thursday, and the US Dollar Index (DXY) recovered from its intraday low of 98.56, its weakest level since May 14. The US labour market data also provided support to the Greenback, with Initial Jobless Claims falling to 206K in the week ending August 15.
The Federal Reserve policymakers continue to prioritize inflation concerns, as shown in the July FOMC minutes. Strategists at Scotiabank argue that while the risk of a September hike is lower than market-implied probabilities (around 30%), it remains a possibility.