Anna 
During the Asian trading session, the USD/CAD pair remains in positive territory, hovering around 1.3600, albeit having pared back some gains observed on Monday. The pair’s upward trajectory follows hawkish commentary from Federal Reserve Bank of Atlanta President Raphael Bostic, who revised his earlier projection of two interest rate cuts this year down to one, citing persistent inflation and robust economic indicators.
Conversely, the Canadian Dollar (CAD) experiences downward pressure, driven by indications from the Bank of Canada (BoC) suggesting potential rate cuts in 2024, as revealed in its latest meeting minutes. Deputy Governor Toni Gravelle reiterated the central bank’s commitment to quantitative tightening, slated for completion by 2025, underscoring its sustainability amidst gradual interest rate reductions.
Despite these factors, the CAD finds support from elevated crude oil prices, which serve to mitigate losses for the USD/CAD pair. Furthermore, the Canadian Dollar receives a boost from better-than-expected Canadian Retail Sales data, further buoying investor sentiment.
Meanwhile, the US Dollar Index (DXY) retreats to near 104.40, even as the 2-year and 10-year yields on US Treasury bonds remain steady at 4.60% and 4.21%, respectively. Despite this slight uptick in US Treasury yields, the USD struggles to garner support.
Federal Reserve Chair Jerome Powell, in a press conference, acknowledged that an unforeseen rise in unemployment could prompt the central bank to consider interest rate reductions. Powell also sought to reassure markets, asserting that the Federal Reserve would adopt a measured approach and refrain from hastily reacting to consecutive months of heightened inflation figures.
Moving forward, market participants will closely monitor the release of Gross Domestic Product (GDP) data for the fourth quarter of 2023 from the United States (US). Additionally, attention will be directed towards Canadian GDP data for January, slated for release on Thursday, as traders seek further insights into the evolving economic landscape.
