USD/CAD climbs to fresh weekly top, closer to mid-1.3800s ahead of FOMC minutes
USD/CAD gains positive traction for the third straight day amid modest USD strength.
US fiscal concerns and Fed rate cut bets might cap gains for the USD and spot prices.
Traders also refrain from placing aggressive bets ahead of the FOMC meeting minutes.
The USD/CAD pair is seen prolonging this week's goodish recovery move from the 1.3685 area, or its lowest level since October 2024, for the third consecutive day on Wednesday. Spot prices currently trade near the weekly top, around the 1.3835-1.3840 region, up nearly 0.30% for the day amid some follow-through US Dollar (USD) buying.
Tuesday's upbeat US economic data helped calm recession fears and assists the USD Index (DXY), which tracks the Greenback against a basket of currencies, to build on the overnight bounce from the vicinity of the monthly low. This, in turn, lends support to the USD/CAD pair, though a combination of factors warrants some caution for the USD bulls and positioning for any further gains.
Investors remain on the edge amid growing concerns about the deteriorating US fiscal condition. Apart from this, the growing market acceptance that the Federal Reserve (Fed) will cut interest rates further in 2025 might contribute to capping the USD and the USD/CAD pair. Traders might also opt to wait for the release of FOMC meeting minutes for cues about the Fed's rate-cut path.
This week's US economic docket also highlights the release of the Prelim Q1 GDP print and the Personal Consumption Expenditure (PCE) Price Index on Thursday and Friday, respectively. This, along with the monthly Canadian GDP print and Crude Oil prices, might influence the commodity-linked Loonie and provide a fresh impetus to the USD/CAD pair during the latter half of the week.
Meanwhile, hotter-than-expected Canadian core inflation figures dashed hopes for a Bank of Canada (BoC) interest rate cut in June. This, along with a modest uptick in Crude Oil prices, could underpin the Canadian Dollar (CAD) and cap the USD/CAD appreciation. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have formed a near-term bottom.
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