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USD/CAD maintained its gains and traded around 1.3640 in early European trading on Wednesday. Falling oil prices weakened the commodity currency, the Canadian dollar, 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 was around $80.30 per barrel. The decline in oil prices was due to the weakening impact of Hurricane Beryl. The storm affected a major oil-producing region in Texas, but the damage was less than the market initially expected.
Oil and gas companies resumed some operations on Tuesday. Some ports reopened and most producers and facilities began to increase production. However, some facilities were damaged and power has not been fully restored, according to Reuters.
In addition, oil prices may face challenges due to weak consumer demand in China, the world’s largest crude oil importer. China’s consumer price index (CPI) data showed that the CPI grew by 0.2% year-on-year in June, lower than the 0.3% growth in May and lower than the market forecast of 0.4%. On a monthly basis, inflation fell by 0.2% in June, compared to expectations of a 0.1% decline.
In addition, Federal Reserve Chairman Powell testified before the U.S. Congress on Tuesday. Powell acknowledged that inflation data had improved, but reiterated the Fed’s cautious stance. Higher interest rates will have a negative impact on the economy of the United States, the largest oil consumer.
“More good data will increase our confidence in inflation,” said Fed Chairman Powell. He also noted that “the first quarter data does not support the greater confidence in the inflation path that the Fed needs to cut interest rates.”
Traders expect Fed Chairman Jerome Powell to deliver his second semi-annual testimony on Wednesday, and the Fed’s Michelle Bowman and Austan Goolsbee will also speak. In addition, people will also focus on the U.S. Consumer Price Index (CPI) data scheduled for release on Thursday.
