The USD/CAD pair remains under intense selling pressure for the third successive day on Friday. The pair prolongs this week’s sharp pullback from levels just above the 1.3200 mark and remains under intense selling pressure.
The steep intraday descent drags spot prices below the 1.3000 psychological mark during the first half of the European session. This is so because of a combination of factors.
The risk-on impulse – as depicted by a generally positive tone around the equity markets – turns out to be a key factor weighing on the safe-haven buck.
The USD Index, which measures the greenback’s performance against a basket of currencies, retreats further from a two-decade high touched earlier this week and dives to a fresh monthly low.
The implied odds for a 75 bps Fed rate hike move in September now stands at 85%. The bets were reaffirmed by the overnight hawkish remarks by Fed Chair Jerome Powell, reiterating the central bank’s strong commitment to bringing inflation down.
This remains supportive of elevated US Treasury bond yields and should act as a tailwind for the USD. Furthermore, concerns that a deeper global economic downturn will hurt fuel demand should cap oil prices and lend some support to the USD/CAD pair.
Market participants now look forward to the release of the monthly Canadian employment figures, due later during the early North American session. This, along with oil price dynamics, will influence the Canadian dollar and provide a fresh impetus to the USD/CAD pair.
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