- USD/CAD faces challenges as the commodity-linked Canadian Dollar receives support from higher crude Oil prices.
- WTI Oil price may further lose ground as the OPEC+ agreed to increase production for September.
- The US Dollar may weaken as the latest US jobs report increases the likelihood of two Fed rate cuts.
USD/CAD remains subdued for the second successive session, trading around 1.3770 during the Asian hours on Monday. The pair faces challenges as the commodity-linked Canadian Dollar (CAD) receives support from the slight increase in crude Oil prices. It is important to note that Canada is the largest Oil exporter to the United States (US). Canadian markets will observe an August Civic Holiday.
West Texas Intermediate (WTI) Oil price rebounds after two days of losses, trading around $66.60 per barrel at the time of writing. However, Oil prices may further decline after the Organization of the Petroleum Exporting Countries and its allies, the group known as OPEC+, decided to increase production for September. The OPEC+ plans to raise output by 547,000 barrels per day next month, aiming to regain market share amid potential supply disruptions linked to Russia.
However, the Canadian Dollar could struggle as US President Donald Trump’s increased tariff to 35% from the previous 25% briefly unsettled markets. However, Canada’s USMCA exemptions limit the effective tariff on exports to around 5%, softening the overall impact on cross-border trade flows.
However, the USD/CAD pair also faced challenges as the US Dollar struggled over a worse-than-expected jobs report in the United States (US) released on Friday, which prompted market reaction to price in two interest rate cuts by the Federal Reserve (Fed). Traders are now pricing in 63 basis points (bps) of cuts by year-end, up from around 34 bps on Thursday, with the first cut seen in September.
