Anna 
During the Asian session on Thursday, the USD/CAD pair extended its losses for the second consecutive day, trading around 1.3750. This decline follows a retreat from the five-month high of 1.3846 reached on Tuesday.
The weakening of the US Dollar Index (DXY) played a significant role in the pair’s downward movement, primarily driven by subdued US Treasury yields. The DXY fell to near 105.90, with the 2-year and 10-year yields on US Treasury bonds standing at 4.92% and 4.57%, respectively. This downward trend in the US Dollar exerted pressure on the USD/CAD pair.
The US Dollar faced further challenges following neutral remarks from Federal Reserve officials. Fed Governor Michelle Bowman noted on Wednesday that progress in inflation is slowing, with a potential stall, while Federal Reserve Bank of Cleveland President Loretta Mester acknowledged that inflation has surpassed expectations.
However, the upward momentum of the Canadian Dollar (CAD) may be limited by the decline in crude oil prices. As Canada’s largest oil exporter to the United States (US), the CAD is sensitive to fluctuations in oil prices. West Texas Intermediate (WTI) crude oil dipped to nearly $82.30 per barrel, raising concerns about demand amidst indications suggesting the potential avoidance of broader conflict in the Middle East.
Despite the CAD’s strength, its advance could be short-lived due to the dovish sentiment surrounding the Bank of Canada (BoC). Expectations for a 25 basis points rate cut from the BoC in June, reinforced by mixed Canadian inflation data released on Tuesday, may mitigate losses in the USD/CAD pair in the near term.
