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USD/CAD extended losses for the second day in a row, trading around 1.3780 in early European trading on Wednesday. Rising oil prices boosted the Canadian dollar, which is bearish for USD/CAD, as Canada is the largest oil exporter to the United States.
At the time of writing, the price of West Texas Intermediate (WTI) crude oil rose to around $82.80 per barrel. The rise in oil prices may be due to supply threats posed by the ongoing geopolitical tensions in the Middle East. Israel has stepped up its operations in Gaza, prompting Palestinians to evacuate Khan Younis due to fears of further attacks. The Israeli army carried out air strikes in the southern Gaza Strip on Tuesday, resulting in the displacement of a large number of Palestinians.
Canada’s S&P Global Manufacturing Purchasing Managers’ Index (PMI) remained stable at 49.3 in June, below the market’s expectation of 50.2. This marks the 14th consecutive month of contraction in Canada’s manufacturing sector. Traders are likely to keep a close eye on Canada’s unemployment rate, which will be released on Friday and is expected to rise to 6.3% in June.
The US dollar (USD) may struggle due to the dovish speech of Federal Reserve (FED) Chairman Jerome Powell on Tuesday. Powell said that the Fed is getting back on track to deflation. However, according to Reuters, Powell wants to see further evidence before cutting interest rates because the US economy and labor market remain strong.
In addition, Chicago Federal Reserve Bank President Austan Goolsbee warned in an interview with CNBC on Tuesday: “I see some warning signs that the real economy is weakening.” Goolsbee further mentioned that the Fed’s progress in achieving its 2% inflation target may be faster than expected.
