Market Analysis

USD/CAD is hovering around 1.3540 during Asian trading hours on Friday, hinting at a possible end to its four-day losing streak. However, trading activity is anticipated to be subdued due to Good Friday. 

The strength of the US Dollar (USD) may be attributed to the hawkish sentiment surrounding the Federal Reserve's commitment to maintaining higher interest rates.

This shift in sentiment could be linked to recent positive economic data from the United States (US). Furthermore, Federal Reserve Governor Christopher Waller's cautious remarks, indicating a lack of urgency to implement rate cuts, have tempered market expectations of three rate cuts in 2024.

US Gross Domestic Product (GDP) Annualized expanded by 3.4% in Q4, exceeding market expectations of remaining unchanged at a 3.2% increase. US Core Personal Consumption Expenditures (QoQ) for the same period came in at 2.0%, slightly below the anticipated and previous reading of 2.1%.

The Canadian Dollar (CAD) received a boost from the increased prospects of foreign currency inflows, driven by the rise in West Texas Intermediate (WTI) oil prices. Expectations of continued production cuts by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) have contributed to the uptick in crude oil prices.

Canada's Gross Domestic Product (MoM) expanded by 0.6% in January, surpassing the projected 0.4% increase. This underscores economic resilience and indicates a strengthening economic outlook. These figures have bolstered confidence in Canada's economic prospects, mitigating market expectations of immediate rate cuts by the Bank of Canada (BoC).

Paraphrasing text from "FX Street" all rights reserved by the original author.