USD/CAD: Dollar Down Slightly before Powell Testimony

The US dollar is down against the Canadian dollar on Tuesday morning with markets pricing in a potentially more cautious tone from Federal Reserve Chair when he testifies to Congress later today.

USD/CAD was lower by 17 pips (-0.14%) to 1.3297 with a daily range of 1.3287 to 1.3320 as of 9.30am GMT. The currency pair gave has been oscillating in a narrow range around the 1.33 handle since the start of the week. The losses for the week so far stand at a minimal -0.15%.

USD trend depends on Powell’s remarks

Jerome Powell will be on Capital Hill in Washington DC in front of lawmakers this week as part of his semi-annual testimony as Chair of the Federal Reserve. Today he is in Congress and tomorrow he will head to the Senate. The coronavirus is on the forefront of everybody’s mind so if Powell doesn’t offer his take on how it will affect the US economy in his official remarks, it is likely that some Congressmen and/or Congresswomen will.

The dollar has been in favour thanks to comparably better economic data in the United States compared to other parts of the world, including Canada. The improved data probably goes some way to explain the optimistic tone taken by Federal Reserve governors Michelle Bowman and President of the Philadelphia Federal Reserve Patrick T. Harker.

If Powell adopts are more so-called “dovish” tone in his remarks because of the risks posed by the coronavirus then the dollar could come under pressure. If however, Powell adopts a relatively “hawkish” tone thanks to the better US economic data, the dollar could resume its current uptrend.

USD/CAD exchange rate likely to be influenced by oil price weakness

With little in the way of Canadian economic data released on Tuesday, the USD/CAD exchange rate is likely to be influenced mostly by movements in the dollar, as well as the ongoing weakness in the price of oil. A weaker oil price tends to negatively impact the Canadian dollar because of Canada’s status as a big oil exporter. WTI crude oil rose back above $50 per barrel on Tuesday having dropped to a fresh one-year low on Monday.

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