USD/CAD: Safe Haven Dollar Eases On Trade Hopes

After advancing for two consecutive weeks, the USD/CAD exchange rate traded flat last week. The pair ended the week at 1.3223, the same level that it had started the week. The US Dollar is slipping lower versus the Canadian dollar at the star of the new trading week.

The dollar trended broadly lower versus its peers in the latter part of the previous week. The greenback fell out of favour following Federal Reserve Chairman Jerome Powell’s appearance before Congress and amid progress in US — China trade talks.

Fed Chair Jerome Powell was upbeat over the state of the US economy as he spoke before Congress at the end of last week. Fed Powell is holding the view that the US economy is in recovery. However, the recovery is so slow that policy needs to stay accommodative. The prospect of low rates for longer disappointed dollar investors, dragging the greenback southwards.

Encouraging trade headlines also hit demand for the dollar. White House Adviser Larry Kudlow indicated that the US and China were closing in on a deal. Chinese state media also reported constructive talks over the weekend.  The headlines have boosted risk appetite, reducing the demand for the safe haven dollar.

The economic calendar is quiet at the beginning of this week. Wednesday sees the release of the minutes to the latest Fed meeting, where the central bank indicated that it was done easing policy.

Lift In Oil Boosts Canadian Dollar

The Canadian dollar had been trending lower after the Bank of Canada, in its monetary policy meeting at the end of last month, raised expectations that it would cut interest rates amid growing concerns over global trade and uncertainty. Two weeks later and the Canadian dollar is still struggling, although losses appear to have bottomed out for now.

Whilst the Canadian central bank acted as a drag on the Canadian dollar, the price of oil helped underpin the value of the Canadian dollar. Trade deal optimism helped lift oil 0.8% across the previous week which in turn boosted the Canadian dollar. Oil is on the rise in early trade on Monday boosting the Canadian currency.

Investors will now look ahead to Tuesday when BoC official Carolyn Wilkins speaks. Any further comments about cutting rates could unnerve investors.

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