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USD/CAD rebounds to near 1.3260, following footprints of the US Dollar.
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The Fed may start reducing interest rates from March 2024.
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Lower oil prices due to trade resumption from the Red sea have impacted the Canadian Dollar.
The USD/CAD pair moved closer to 1.3260 in the first New York session after recovering from key support at 1.3180. Loonie assets have found significant bids after a modest recovery in the US dollar index (DXY) and a modest sell-off in oil prices.
The S&P500 is expected to open on a flat note, portraying a calmer market mood Business activities are quite thin due to the festive mood. The USD index recovered to near 101.40 while the broader bias is still bearish as investors expect the Federal Reserve (Fed) to cut interest rates earlier than forecast.
According to the CME Fedwatch tool, there is a 73% chance the Fed will cut interest rates by 25 basis points (bps) to 5.00-5.25%. 72% chance the Fed will cut rates again in May.
In addition to easing price pressures, easing labor market conditions in the US economy will force Fed policymakers to approve rate cuts. The US Department of Labor reported higher-projected initial jobless claims (IJC) for the week ending December 22. People claiming jobless benefits were 218K, up from the consensus of 210K and the previous reading of 206K.
On the Canadian Dollar front, lower oil prices due to resumption of commercial shipment activities from the Red Sea route have dampened demand for the Canadian Dollar. Investors should note that Canada is the leading exporter of oil to the United States and lower oil prices impact the Canadian Dollar.
USD/CAD
