USD/CAD falls as US Dollar weakens and oil prices rise

23 mar 2023

During early trading on Thursday, the USD/CAD pair saw a decline, hitting its intraday low near 1.3700. This came after a two-day absence, as the US Dollar weakened and oil prices increased. The US Dollar Index (DXY) saw its sixth consecutive day of decline, with bears pushing the index towards the 102.30 mark. This decline occurred despite the Federal Reserve's announcement of a 0.25% rate hike, as dovish concerns about the US central bank's next move and fears regarding the US banking sector persisted.

While the Fed's rate hike matched market expectations, its statement regarding "some additional policy firming may be appropriate" instead of "ongoing increases in the target range will be appropriate" pushed back policy hawks. The statements made by Fed Chair Jerome Powell and US Treasury Secretary Janet Yellen were also important. Powell indicated that there would be no rate cuts for this year, providing breathing space for greenback bears. Yellen, on the other hand, ruled out considering "blanket insurance" for bank deposits. Bloomberg also reported that the Federal Deposit Insurance Corporation would delay the bid deadline for a Silicon Valley private bank.

Despite a surprise build in weekly inventories, WTI crude oil continued its upward trend, rising for the fourth consecutive day and ignoring the downbeat EIA Crude Oil Stocks Change report. This was driven by optimism surrounding China and hopes for increased energy demand.

Looking ahead, second-tier US and Canadian statistics may entertain traders ahead of Friday's key data, which includes Canadian Retail Sales and US Durable Goods Orders for January and February.