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03/09/24
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USD/CAD Strengthens Ahead of Key Economic Data Amid Rising Oil Prices
The USD/CAD currency pair has shown strength, trading around the 1.3500 mark during the early Asian session on Tuesday, marking its fifth consecutive day in positive territory. As traders await the upcoming US ISM Manufacturing PMI figures for August and employment data, the rising crude oil prices may limit gains for the pair, potentially offering support to the Canadian dollar.
In the current trading landscape, the US Dollar Index (DXY) has maintained a steady position around 101.60 as market participants adopt a cautious stance ahead of significant labor data scheduled for release later in the week. The focus on the ISM Manufacturing PMI report is particularly notable, as it will provide insights into the economic health of the manufacturing sector.
The US dollar experienced its most significant monthly decline in August, primarily driven by expectations of potential interest rate cuts by the Federal Reserve in September. Analysts predict that the dollar will continue to face downward pressure for the remainder of the year as market sentiment adjusts to economic projections.
The ISM Manufacturing PMI for August is anticipated to rise to 47.5 from July’s 46.8. A stronger-than-expected reading could bolster the US dollar against its Canadian counterpart, offering a temporary reprieve from recent vulnerabilities.
In addition, attention will soon shift to the upcoming US Nonfarm Payrolls (NFP) report expected this Friday, where a rise to 165,000 for August is projected compared to July’s 114,000. This information may shed light on the Federal Reserve’s potential rate-cutting strategy moving forward.
On the commodity front, concerns regarding Libya’s oil production may support crude prices, which would, in turn, be favorable for the Canadian dollar, given Canada’s status as the largest oil supplier to the United States. Consequently, any increase in oil prices typically has a constructive effect on the value of the Canadian dollar.
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