Ella 
USD/CAD extended its losses to around 1.3490 in Asia on Thursday amid weakness in the greenback, which could be attributed to low U.S. Treasury yields. However, U.S. bond yields rebounded after the minutes of Wednesday’s Federal Reserve meeting expressed a cautious tone on cutting interest rates.
The Federal Reserve’s monetary policy easing cycle seems to be delayed, which is related to the significantly higher-than-expected Consumer Price Index (CPI) and Producer Price Index (PPI) released after the Federal Reserve’s January meeting, as well as strong employment data.
The U.S. dollar index is hovering near 104.00. As of press time, the 2-year U.S. Treasury yield and the 10-year U.S. Treasury yield were 4.65% and 4.21% respectively. The minutes of the Fed meeting emphasized the need for further evidence that deflation has disappeared to alleviate concerns about upside risks.
Currently, futures funds show that the market predicts a 70% probability that the Federal Reserve will cut interest rates at its June meeting. The market currently sees a 52.2% chance of easing policy starting in June, according to the CME FedWatch Tool.
Lower crude oil prices could halt the Canadian dollar’s upward momentum, limiting losses in the USD/CAD pair. While geopolitical tensions in the Middle East typically lift oil prices on fears of supply disruptions, rising global interest rates have tempered the impact by curbing oil demand. At press time, WTI oil prices were hovering around $77.80 a barrel, down slightly.
Canadian retail sales data for December will be released on Thursday. On the other hand, S&P U.S. Purchasing Managers Index (PMI) data, weekly initial jobless claims and existing home sales data will also be in focus.
