Ella 
USD/CAD is consolidating around 1.3350 during the Asian session on Tuesday, trying to recoup the recent losses recorded on Monday. The Canadian dollar (CAD) may be slightly firmer on the back of stabilizing crude oil prices.
As of press time, WTI oil prices were hovering around $71.00 a barrel. The market is worried that the Israel-Gaza war will escalate into a regional conflict, and crude oil prices fluctuate sideways. US Secretary of State Antony Blinken arrives in Tel Aviv to discuss communication with Arab leaders.
Canada’s international merchandise trade account and building permit data to be released on Tuesday will provide a deeper understanding of Canada’s economic performance. Canada’s international merchandise trade balance is expected to fall to $2.0 billion in November from $2.97 billion, signaling possible changes in Canada’s imports and exports of goods.
Additionally, Canadian building permits are expected to fall from 2.3% to 2.0% in November, suggesting construction activity may be slowing. Construction data is closely watched because it reflects broader trends in the real estate and housing sectors and contributes to changes in corporate investment, which often triggers volatility in the Canadian dollar.
The cautious stance expressed by Atlanta Fed President Raphael W. Bostic and US Federal Reserve Governor Michelle W. Bowman had an impact on market sentiment and the US dollar (USD). Bostic is expected to cut interest rates twice by 25 basis points each by the end of 2024, reflecting an aggressive approach to combating falling inflation and signaling the Fed’s preference to use monetary policy tools to support the economy.
Bowman acknowledged that the current policy stance seemed restrictive enough, but also added to the dovish sentiment by factoring in the possibility that the Fed could cut policy rates if inflation approaches its 2% target. This stance emphasizes the flexibility of monetary policy and triggers risk appetite. Investors may seek higher-yielding assets, which could put downward pressure on the U.S. dollar.
