The USD/CAD exchange rate has experienced a slight decline, hovering around 1.4350, influenced by a recent downturn in the US Dollar. Following a peak of 108.58 on Tuesday, the US Dollar Index has retreated to approximately 108.30, prompting a revaluation of the currency pair. This situation marks a halt in its two-day upward trend.
The weakening of the US Dollar is becoming more pronounced, particularly in light of a potentially cautious approach by the Federal Reserve regarding future interest rate cuts in 2025. This shift in the Fed’s stance could indicate a re-calibration of monetary policies, reflecting the unpredictable landscape surrounding upcoming economic strategies under the anticipated Trump administration.
Meanwhile, the Canadian Dollar has gained traction due to rising crude oil prices, as Canada remains the largest exporter of oil to the United States. West Texas Intermediate (WTI) crude prices have maintained their upward momentum, reaching approximately $71.70 per barrel, marking the fifth consecutive day of gains. The consistent rise in oil prices is driven by renewed investor optimism regarding a rebound in China’s economy which is projected to enhance fuel demand.
As 2025 begins, China’s leadership has indicated a commitment to proactive policies aimed at stimulating economic growth. This development has facilitated a more positive sentiment among investors, particularly as they monitor the implications for global oil demand.
Looking to the near future, the financial markets will be attentive to upcoming economic reports, including the US weekly Initial Jobless Claims and the S&P Global Manufacturing PMI data for December. These indicators will provide further insight into the economic health of both the US and Canadian economies.
