Canadian Dollar strengthens as receding Fed rate hike bets weigh US Dollar
The USD/CAD pair loses momentum to near 1.4145 during the early European session on Friday. The US Dollar (USD) weakens against the Canadian Dollar (CAD) on receding expectations of a rate increase from the US Federal Reserve (Fed).
The minutes from the Fed's June 16 to 17 meeting, the first under new Fed Chairman Kevin Warsh, showed concern about high inflation mounted among policymakers, and a few participants saw a case to hike the interest rates.
New York Fed President John Williams said on Thursday that despite the resumption of hostilities in the Middle East, he was not looking for a sustained rise in energy prices over the remainder of the year.
According to the CME FedWatch tool, expectations for a rate hike of at least 25 basis points (bps) at the July meeting eased back to 24.6% from 31% in the prior session, but up from 18.2% a week ago. For the September policy meeting, markets are pricing in a 62.3% probability of a hike, down from the 66.6% on Wednesday but an increase from the 54.1% a week earlier.
Crude oil prices remain elevated amid shopping traffic slowdown in the Strait of Hormuz. Late Thursday, Iranian officials and state media have reported multiple explosions in the country’s south, including near the Bushehr nuclear facility. The reports came after an earlier wave of US strikes, which was followed by Iranian missile fire at a US base in Jordan. It is worth noting that Canada is a major oil-exporting country, and high crude oil prices generally have a positive impact on the Loonie.
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