USD/CAD Gains Traction as US Data Supports, Government Shutdown Averted

The USD/CAD pair is starting the week on a positive note, with the spot price trading around 1.3580 during the early Asian session on Monday. This upward movement is primarily attributed to the strength of the US Dollar (USD), supported by moderate economic data released on Friday.

The US Dollar Index (DXY) is maintaining its ground and continues to gain strength during the second trading session. This comes after the release of moderate datasets from the United States (US). The spot price for DXY is currently around 106.20.

Furthermore, the upbeat performance of US Treasury Yields is contributing to the USD’s strength. The yield on the 10-year US Treasury bond is at 4.61%, up by 0.96% at the time of writing.

One significant factor supporting the USD/CAD pair is the positive sentiment surrounding the US Dollar following the release of economic data on Friday. The US Michigan Consumer Sentiment Index for September improved to 68.1, surpassing expectations and the previous figure of 67.7.

In addition to this, the US Core PCE Price Index for August showed a year-on-year increase of 3.9%, which was in line with estimates and slightly lower than the previous reading of 4.3%. The Core PCE on a monthly basis (MoM) indicated a softer reading of 0.1%, as opposed to the market consensus of remaining at the previous 0.2%.

Another contributing factor to the USD’s upward trajectory is the successful passage of bills in the US to avert a government shutdown. This move secured funding until November 17, providing stability and confidence in the US Dollar.

Conversely, the Canadian Dollar (CAD) faced downward pressure due to disappointing Gross Domestic Product (GDP) data for July. The GDP remained flat at 0.0%, falling short of market expectations for 0.1% growth. Furthermore, June saw a contraction of 0.2% in GDP.

The decline in crude oil prices over the past week also weakened the Canadian Dollar. Oil prices, which had reached one-year highs, retreated due to concerns about the Federal Reserve’s interest rate trajectory. Canada, being the largest oil exporter to the United States, is particularly sensitive to oil price fluctuations.

However, it’s worth noting that Western Texas Intermediate (WTI), the US crude oil benchmark, is attempting to reverse its recent losses, currently trading around $90.10 per barrel.

Traders are keeping an eye on the upcoming release of the US ISM Manufacturing PMI for September and a speech by Fed Chair Jerome Powell, both scheduled for Monday. Additionally, the S&P Global Manufacturing PMI for Canada in September will be closely monitored by market participants.