Ella 
During the Asian session on Tuesday, USD/CAD rose to around 1.3810, extending gains for the second consecutive trading day. However, the U.S. dollar (USD) faces challenges as it struggles to halt its decline. The dollar may face headwinds from fluctuations in U.S. bond yields. However, market participants appeared to be taking a cautious stance ahead of the release of US inflation data, which provided support for USD/CAD.
U.S. Treasury Secretary Janet Yellen expressed confidence in the resilience of the U.S. economy despite concerns raised by credit rating agency Moody’s. She expressed disapproval of Moody’s decision last week to lower its U.S. debt outlook. U.S. Secretary of State Yellen also said at the closing ceremony of the Asia-Pacific Economic Cooperation Finance Ministers’ Meeting in San Francisco, California that the U.S. economy is strong and the Treasury market is both safe and liquid. Moody’s decision to downgrade the U.S. credit rating outlook from “stable” to “negative” was based on concerns about large fiscal deficits and declining debt affordability.
The upcoming US inflation data on Tuesday is indeed a key event for investors and it is likely to influence the direction of USD/CAD. Federal Reserve officials have stressed that further tightening will depend on the data. If the inflation data is in line with expectations, it could lead investors to believe the Fed is done raising interest rates.
On the other hand, the Canadian dollar (CAD) appears to have failed to benefit from rising crude oil prices. West Texas Intermediate (WTI) crude oil prices continue their winning streak, trading around 78.50 at the time of writing. OPEC said in its monthly report that market fundamentals remain strong, which underpinned crude prices. In addition, the United States’ crackdown on Russian oil exports is also related to supply issues.
Toni Gravelle, Deputy Governor of the Bank of Canada (BoC), will speak during a panel discussion titled “Challenges to Financial Stability and Financial Regulation in a Context of Increased Uncertainty.” This discussion is likely to shed light on the Bank of Canada’s views and insights on the current economic climate and challenges facing the financial stability and regulatory areas.
