USD/CAD Price Analysis – Nov 26, 2024
Daily Price Outlook
Despite the US Dollar bearish bias, the USD/CAD pair has continued to rise, trading around 1.4090, with an intra-day high of 1.4178.
However, the upward trend can be largely attributed to market uncertainty sparked by President-elect Donald Trump's announcement of a 25% tariff on imports from Mexico and Canada, along with a 10% increase in tariffs on Chinese goods entering the US.
These developments weighed heavily on the Canadian Dollar, which is sensitive to risk, pushing the USD/CAD higher.
Moreover, weaker oil prices are adding pressure on the CAD as Canada is the largest oil exporter to the US, its currency often moves in line with oil price changes. When crude prices drop, the CAD tends to weaken, further fueling the rise in USD/CAD.
USD/CAD Surges Amid Tariff Concerns and Falling Oil Prices
However, the global market sentiment has been flashing red as market uncertainty increased following President-elect Donald Trump's announcement of a 25% tariff on imports from Mexico and Canada, along with a 10% increase in tariffs on Chinese goods entering the US.
This news has weakened market sentiment, putting pressure on the Canadian Dollar (CAD), which is sensitive to such risk factors.
US President-elect Donald Trump and Canadian Prime Minister Justin Trudeau had a positive talk on trade and border security on Monday night. While the conversation was seen as constructive, Canada’s Deputy Prime Minister did not mention Trump’s threat of tariffs.
She stressed that the Canada-US relationship is balanced and beneficial, especially for American workers, but the threat of tariffs is still affecting market sentiment.
On the other hand, the weaker crude oil prices are adding pressure on the CAD. As Canada is the largest oil exporter to the US, the value of the Canadian Dollar often moves in sync with oil price changes. At the time of writing, West Texas Intermediate (WTI) oil is trading around $69.00.
The decline in oil prices follows reports of a potential resolution to the Israel-Hezbollah conflict, easing geopolitical tensions and further contributing to the drop in oil prices, which typically weakens the CAD.
Therefore, the combination of tariff concerns and falling oil prices is putting downward pressure on the Canadian Dollar, leading to a continued rise in the USD/CAD pair. This allows the USD to strengthen against the CAD, pushing the pair higher.
USD Faces Pressure Amid Fed's Rate Cut Comments, but Strong PMI Data Provides Stability
On the US front, the US Dollar (USD) is facing pressure after comments from Federal Reserve (Fed) officials on Tuesday. Federal Reserve Bank of Chicago President Austan Goolsbee suggested that the Fed is likely to continue lowering interest rates to a neutral level, which neither stimulates nor restricts economic activity.
Meanwhile, Minneapolis Fed President Neel Kashkari mentioned that it might be appropriate to consider another rate cut at the Fed's meeting in December, according to Bloomberg.
Despite these dovish signals, the declines in the US dollar could be short-lived. This is mainly due to strong preliminary data from the S&P Global US Purchasing Managers’ Index (PMI), which shows better-than-expected economic performance.
These solid figures have helped reduce concerns about the economy, supporting the idea that the Fed may take a more gradual approach to further rate cuts.
Therefore, the Fed's dovish comments put some pressure on the USD, but strong PMI data provides support. This mixed outlook limits significant declines in the USD, helping to keep the USD/CAD pair relatively stable, with potential for gradual upward movement.
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