USD/CAD Edges Lower Amid Soft USD and Divergent Interest Rate Expectations
The USD/CAD pair has been trading lower against a softer US Dollar, although downside seems limited. The price of crude oil has retreated from its highest level since June 11, contributing to the Canadian Dollar's weakness. Divergent expectations for interest rate hikes by the Bank of Canada and the Federal Reserve are also weighing on the Loonie.
US President Donald Trump's new tariffs, which will affect nearly all imports, have further tempered investors' appetite for riskier assets, favoring USD bulls. The flash US PMIs may provide some impetus to the pair, while the highly-anticipated FOMC meeting next week will determine the near-term trajectory for the Greenback.
Despite the underlying bullish tone of the USD, traders are advised to wait for follow-through selling before confirming that the USD/CAD pair's recovery has run out of steam. The Canadian Dollar's key drivers include interest rates set by the Bank of Canada, oil prices, and the health of its economy.