USD/CAD holds lower grounds at two-month bottom, down for the fifth consecutive day. WTI crude oil struggles to recover amid sluggish data, mixed OPEC update. US Dollar Index drops to the lowest levels since late April 2022 as Fed hawks retreats amid easing inflation. US Retail Sales, Michigan CSI and UoM 5-year Consumer Inflation Expectations eyed for fresh impulse. USD/CAD stabilizes around 1.3320-25 after refreshing the two-month low during early Friday in Europe. In doing so, the Loonie pair traces the inactive performance of the WTI crude oil price, Canada’s key export item, while also cheering the US Dollar weakness. It’s worth noting, however, that the cautious mood ahead of the key US consumer-centric data seems to prod the pair traders of late.
WTI crude oil clings to mild gains around $82.50 as it consolidates the previous day’s pullback from a five-month high amid inactive markets. It’s worth noting that the hopes of upbeat Oil demand and supply cuts seem struggling to please the black gold buyers amid recession woes. That said, the Organization of the Petroleum Exporting Countries (OPEC) released its monthly report on Thursday and left the global oil demand growth forecast for 2023 unchanged at 2.32 million barrels per day, as reported by Reuters. The OPEC report also mentioned, “OPEC oil output fell by 86,000 bpd in March to 28.80 million bpd.”
On the other hand, the US Dollar Index (DXY) slides beneath the lowest level of 2023, marked in February, as the greenback bears attack the 100.80 level, around 100.85 at the latest. In doing so, the greenback’s gauge versus the six major currencies portrays the market’s easing bias about the hawkish Federal Reserve (Fed) moves, mainly due to the downside of US inflation and recent employment numbers.
That said, the US Producer Price Index (PPI) for March dropped to a four-month low of -0.5% MoM versus 0.0% expected and prior. Further, the PPI YoY also declined to 2.7% from 4.9% in previous readouts, versus market forecasts of 3.0%. Additionally weighing on the hawkish Fed bets and the US Dollar is the US Initial Jobless Claims figure as it rose to 239K versus 232K expected and 228K prior. Thursday’s downbeat US data was in line with the previous softer prints of the US Consumer Price Index (CPI). Also to note is the Fed policymakers’ hesitance in supporting further rate hikes, per the Minutes of the latest Federal Open Market Committee (FOMC) Monetary Policy Meeting published on Wednesday.
Amid these plays, the US 10-year and two-year Treasury bond yields retreat to 3.44% and 3.96% in that order while the S&P 500 Futures struggle after printing the biggest daily gain in two weeks. At home, Bank of Canada (BoC) Governor Tiff Macklem tried defending the latest status quo on the monetary policy while saying, “We need a period of weak growth." BoC’s Macklem also said that the implied expectation in the market is that we're going to be cutting our policy rate later in the year. That doesn't look today like the most likely scenario to us.
Looking forward, US Retail Sales for March, the Michigan Consumer Sentiment Index (CSI) for April and the University of Michigan’s (UoM) 5-year Consumer Inflation Expectations will be important to watch for clear directions for the USD/CAD traders. That said, the bears are likely to keep the reins unless the scheduled data provide a major positive surprise.
A daily closing below the five-month-old ascending support line, around 1.3300 by the pres time, becomes necessary for the bears to keep reins. Otherwise, the oversold RSI conditions can trigger a corrective bounce toward the previous weekly low of near 1.3405.