USD/CAD depreciates as the Canadian Dollar gains ground amid higher crude Oil prices.
WTI price climbs amid persistent fears of supply disruptions stemming from ongoing Israel-Iran tensions.
The Canadian 10-year yield is trading around 3.4%, a five-month high, due to the odds of hawkish BoC policy outlook.
USD/CAD continues to lose ground for the fourth successive session, trading around 1.3560 during the European hours on Tuesday. The pair depreciates as the Canadian Dollar (CAD), a commodity-linked currency, draws support from the higher crude Oil prices, given Canada’s status as the largest crude supplier to the United States (US), the largest Oil consumer.
West Texas Intermediate (WTI) Oil price retraces its recent losses registered in the previous session, trading around $71.10 per barrel at the time of writing. Oil prices rise due to ongoing fears over supply disruption amid Israel-Iran hostilities. Traders are monitoring successive missile exchanges between the two security states and the looming threat of supply disruptions through the Strait of Hormuz.
Additionally, the yield on the Canadian 10-year government bond is trading around 3.4%, a five-month high. The rise in yields is supported by hawkish expectations for the Bank of Canada’s (BoC) policy outlook, as core inflation readings have stubbornly held above the BoC’s 2% target. Moreover, an unexpected 1.2% rise in Canadian April retail sales reinforced the hawkish view for future policy decisions by the central bank. The higher yields attract foreign capital seeking better returns, increasing demand for the Canadian Dollar.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is remaining stable at around 98.20 at the time of writing. The US Retail Sales data for May will be eyed on Tuesday. Traders will shift their focus toward the Federal Reserve's (Fed) interest rate decision, scheduled for Wednesday.
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