- USD/CAD Finds Support After Hawkish Comments from Fed Chair Jerome Powell.
- The CME FedWatch Tool indicates that traders are now expecting the first rate cut to occur in July.
- The Canadian dollar, closely tied to commodity markets, could receive support from rising crude oil prices.
USD/CAD Rebounds, Trading Around 1.3860 Amid Subdued Market Activity
USD/CAD halted its two-day losing streak, hovering around 1.3860 during the Asian hours. However, with the Good Friday holiday keeping market activity subdued, volatility is expected to remain low.
US Dollar Supported by Hawkish Comments from Fed Chair Jerome Powell
The US Dollar gained strength following hawkish remarks from Federal Reserve Chair Jerome Powell, who warned that persistent inflation combined with a slowing economy could endanger the Fed’s dual mandate, raising concerns over stagflation risks.
Market Sentiment Weakened by Trump’s Criticism of Powell
Market sentiment was further dampened after former President Trump criticized Fed Chair Powell’s recent comments. Despite this, traders, according to the CME FedWatch Tool, have priced in around 86 basis points of rate cuts by the end of 2025, with the first expected in July.
US Labor Data: Jobless Claims Beat Forecasts, but Continuing Claims Rise
The US Department of Labor reported a drop in Initial Jobless Claims to 215,000 for the week ending April 12, surpassing expectations. However, Continuing Claims saw an increase of 41,000, reaching 1.885 million for the week ending April 5.
Crude Oil Prices Provide Support for CAD Amid USD/CAD Gains
The commodity-linked Canadian Dollar (CAD) may cap further gains in USD/CAD, as rising crude oil prices offer support. Oil prices surged following new US sanctions on Iranian exports, raising concerns about tighter global supply.
Uncertainty Looms Over US Tariffs on Key Commodities
Market uncertainty persists amid speculation about potential US tariffs on key commodities, including copper, semiconductors, pharmaceuticals, and lumber.
Bank of Canada Warns of Recession Risks Amid Potential Trade War
The Bank of Canada (BoC) issued a cautionary note, warning that a spike in inflation triggered by a potential global trade war under a Trump-era policy could push the Canadian economy into a “deep recession.” While the BoC did not provide an updated forecast, it outlined two potential scenarios reflecting the uncertainty surrounding US tariff policies and their potential impact on Canada.
