Canadian Dollar declines as oil prices ease
USD/CAD rises for the third consecutive day, trading around 1.4140 during the Asian hours on Friday. The pair appreciates as the commodity-linked Canadian Dollar (CAD) struggles amid lower oil prices. Canada is a major net exporter of crude oil, primarily sending its supply to the United States (US). Lower oil prices weigh on Canada's export revenues, which fundamentally pressure the CAD down.
West Texas Intermediate (WTI) oil price edges lower, slipping to around $75.10 per barrel at the time of writing and reversing the modest gains recorded in the previous session. The US oil benchmark is now on track to lock in a steep weekly loss of roughly 9.5% as energy investors react to rapidly improving shipping conditions in the Strait of Hormuz after US President Donald Trump signed a deal with Iran to end the war.
The US and Iran signed an initial agreement, kicking off 60 days of negotiations on a final deal to end the war, per CNN. Additionally, the US military earlier confirmed it had ended its blockade on Iranian ports near the Strait of Hormuz, as officials claim millions of barrels are once again flowing through the vital waterway. Positive developments surrounding the US-Iran peace deal could boost riskier assets, such as the shared currency, in the near term.
The Federal Open Market Committee (FOMC) voted unanimously on Wednesday to hold its benchmark overnight borrowing rate steady at a range of 3.5%–3.75%. However, the decision carried a hawkish tone, with nearly half of the officials signaling that at least one rate hike could be required later this year.
This hawkish pause by the central bank could bolster the US Dollar (USD) and provide a tailwind for the USD/CAD pair. In his debut press conference, newly appointed Federal Reserve (Fed) Chairman Kevin Warsh emphasized that "price stability" remains the Fed's ultimate guiding principle.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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