Ella 
The USD/CAD currency pair traded within a tight range during early Asian trading on Tuesday. Oil USD/CAD was trading within a narrow range in early Asian trading on Tuesday. Falling oil prices weighed on the Canadian dollar, while the Federal Reserve’s decision to maintain higher interest rates for a longer period of time boosted the U.S. dollar overall. At press time, USD/CAD was trading around 1.3457, up 0.02% on the day.
The U.S. dollar index (DXY) is an indicator that measures the value of the U.S. dollar relative to a basket of foreign currencies. Affected by the demand for the U.S. dollar and the 10-year U.S. Treasury yield rising to the highest level since October 2007 (106.09), the U.S. dollar index has fallen since November. The highest level of 106.09 fell back and is currently hovering around 105.95.
Still, oil prices fell for a second day on Tuesday, weighing on the commodity-linked Canadian dollar and potentially limiting upside for the USD/CAD pair as Canada is a major oil exporter to the United States.
Most Fed officials still expect further rate hikes later this year. Boston and San Francisco Fed Presidents Susan Collins and Mary Daly stressed that although inflation is slowing, interest rate hikes are still possible in the future. Chicago Fed President Austan Goolsbee said the U.S. economy may achieve a soft landing, but the risk of inflation remains high and the Fed should go all out to increase the inflation rate to 2%. These hawkish comments from Fed officials boosted the US dollar and acted as a “tailwind” for the USD/CAD pair.
Next up, U.S. consumer confidence and housing data for September will be released later on Tuesday. The annual rate of U.S. second-quarter gross domestic product will be released on Thursday. Closely watched will be Friday’s release of the core personal consumption expenditures (PCE) price index, the Fed’s preferred measure of consumer inflation. The PCE price index is expected to fall to an annual rate of 3.9% from 4.2%. Additionally, Canada’s GDP will be released on Friday. Market participants will be looking for clues from these data to provide clarity on USD/CAD direction.
