USD/CAD remains under selling pressure below 1.3530 amid weaker US Dollar, higher oil prices
- USD/CAD drifts lower to 1.3520 on the softer US Dollar on Thursday.
- The US March ISM Services PMI came in weaker than expected, easing to 51.4 from 52.6 in February.
- Higher crude oil prices amid the fear of oil supply disruptions lift the commodity-linked Loonie.
The USD/CAD pair trades on a softer note near 1.3520 on Thursday during the early Asian trading hours. The rise of crude oil prices to their highest levels since October boost the commodity-linked Loonie. Additionally, the weaker-than-expected US ISM Services PMI data for March weighs on the Greenback and drags the USD/CAD pair lower.
The Institute for Supply Management (ISM) showed on Wednesday that the US Services Purchasing Managers Index (PMI) for March dropped to 51.4 from 52.6 in February. This figure came in worse than the market expectation of 52.7. The US Dollar (USD) attracts some sellers following the downbeat figure. Meanwhile, Automatic Data Processing (ADP) reported that private sector employment in the US rose by 184,000 in March from the 155,000 increase (revised from 140,000) in February, above the market consensus of 148,000.
Federal Reserve (Fed) Governor Adriana Kugler said on Wednesday that she believes inflation will slow gradually this year and pave the way for the Fed to cut interest rates. Furthermore, Fed Chair Jerome Powell reiterated that the policy rate is likely at its peak in the current cycle. Powell further stated that the FOMC policymakers see it as appropriate to begin cutting the policy rate, If the economy evolves as the Fed expects. These dovish comments exert further selling pressure on the USD and create a headwind for the USD/CAD pair.
On the Loonie front, the geopolitical tensions in the Middle East raise the fear of oil supply disruptions and boost the Canadian Dollar (CAD). It’s worth noting that crude oil is one of the top five commodities exported from Canada and higher oil prices can positively affect Canada's economic performance and strengthen the CAD,
Looking ahead, market players will keep an eye on the US February Goods Trade Balance and weekly Initial Jobless Claims. Also, the Fed’s Barkin, Goolsbee, Kashkari, and Mester are set to speak on Thursday.