The US dollar Canadian dollar exchange rate rallied to 1.3258, its highest level in over a month, before slipping lower. The pair closed Tuesday at 1.3233, approximately the same level that the pair started the session at. The US dollar is edging higher versus the Canadian dollar in early trade on Wednesday.
The US dollar was broadly in favour in the previous session as investors digested a highly anticipated speech by President Trump at the Economic Club of New York. The markets were particularly interested in President Trump’s take on progress between the US — China towards a phase one trade deal. Whilst Trump touched on international relations in the speech, he refrained from making any concrete declarations about the outlook for a phase one trade deal. He did say that a deal could come soon. This was sufficient to lift US stock markets to a fresh all time high, boosting demand for the dollar.
Today investors will focus on another important speech, this time by Federal Reserve Chair Jerome Powell. Jerome Powell will give a testimony before Congress over the state of the US economy. The testimony will come after the Federal Reserve cut interest rates for a third time in as many months. A cautious Jerome Powell could drag on the dollar.
Declining Oil Drags on Canadian Dollar
The Canadian dollar struggled for direction on Tuesday. With no macro-economic data for investors to focus on so far this week, oil has been the primary focus for Canadian dollar investors. Oil extended losses on Tuesday, declining a further 0.2% adding to Monday’s 0.7% decline. Given that the Canadian dollar (against the greenback) is positively correlated to the price of WTI, the 0.9% drop in oil this week is making it difficult for the commodity related currency to gain traction.
Today is another quiet day for Canadian macro data, meaning that once again the Canadian dollar will be driven by the price of oil. Oil traders will be focusing on Fed Chair Powell for clues over the health of the US economy.