USD/CAD retreats from one-week high, up little around 1.2770-75 ahead of US data By HareshMenghani USDCAD RiskAppetite Bonds Fed Currencies
The pair added to the previous day's hawkish FOMC minutes-inspired upward momentum and gained some follow-through traction for the second successive day on Thursday. This also marked the third day of a positive move in the previous four sessions and pushed the USD/CAD pair to a one-week high. However, a combination of factors failed to assist the major to find acceptance above the 1.2800 mark, instead attracted some sellers at higher levels.
Unrest in Kazakhstan , along with supply outages in Libya lifted crude oil prices to the highest level since November 24. Kazakhstan is experiencing the worst street protests since gaining independence three decades ago. Moreover, Libyan oil output is down due to pipeline maintenance and oilfield shutdowns.
In fact, the December 14-15 FOMC monetary policy meeting minutes indicated that the US central bank could hike interest rates earlier than anticipated previously to combat high inflation. The markets have started pricing in the prospects for an eventual liftoff in March. This was reinforced by the fact that the US 2-year notes, which are sensitive to rate hike expectations along with 5-year notes, jumped to a near two-year high.
Moreover, the yield on the benchmark 10-year US government bond shot to the highest level since October. This, in turn, supports prospects for the emergence of some USD dip-buying, suggesting that any meaningful slide could be seen as an opportunity to initiate fresh bullish positions around the USD/CAD pair., highlighting the usual Weekly Initial Jobless Claims and ISM Services PMI. Apart from this, the US bond yields and the broader market risk sentiment should influence the USD.