Ahead of Wednesday's Fed Beige Book and US JOLTS Job Openings, USD/CAD is up.
As higher US yields draw in international investment, demand for the US dollar rises.
Expectations of a possible rate drop by the Bank of Canada in September put pressure on the Canadian dollar.
Wednesday's European hours saw the USD/CAD trade at about 1.3800, continuing its advances for the third straight session. Later in the North American session, the US Federal Reserve (Fed) Beige Book and the US JOLTS Job Openings will be monitored.
As rising yields on US Treasury bonds provide support for the US dollar (USD), the USD/CAD pair gains ground. As of this writing, the 2-year is trading at 3.66% and the 10-year is at 4.29%. It is important to remember that rising Treasury yields boost the appeal of US assets to foreign investors, which raises demand for USD due to capital inflows.
However, given the likelihood of a rate drop by the US Federal Reserve (Fed) this month and the dovish comments made by Fed members, the greenback's upside potential may be limited. More than 89% of a 25 basis point (bps) rate drop by the Fed at the September policy meeting is priced in, according to the CME FedWatch tool, up from 86% a day ago.
This week, traders are also anticipating labor market statistics that may influence the US Federal Reserve's (Fed) September policy decision. ADP Employment Change, Average Hourly Earnings, and August Nonfarm Payrolls are important releases.
As the Canadian dollar (CAD) struggles due to the possibility of a September interest rate drop by the Bank of Canada (BoC), the USD/CAD pair also finds support. According to Reuters, traders are now pricing in a nearly 55% possibility that the Canadian central bank would lower rates in its upcoming decision, up from about a 40% chance the previous week.
As higher US yields draw in international investment, demand for the US dollar rises.
Expectations of a possible rate drop by the Bank of Canada in September put pressure on the Canadian dollar.
Wednesday's European hours saw the USD/CAD trade at about 1.3800, continuing its advances for the third straight session. Later in the North American session, the US Federal Reserve (Fed) Beige Book and the US JOLTS Job Openings will be monitored.
As rising yields on US Treasury bonds provide support for the US dollar (USD), the USD/CAD pair gains ground. As of this writing, the 2-year is trading at 3.66% and the 10-year is at 4.29%. It is important to remember that rising Treasury yields boost the appeal of US assets to foreign investors, which raises demand for USD due to capital inflows.
However, given the likelihood of a rate drop by the US Federal Reserve (Fed) this month and the dovish comments made by Fed members, the greenback's upside potential may be limited. More than 89% of a 25 basis point (bps) rate drop by the Fed at the September policy meeting is priced in, according to the CME FedWatch tool, up from 86% a day ago.
This week, traders are also anticipating labor market statistics that may influence the US Federal Reserve's (Fed) September policy decision. ADP Employment Change, Average Hourly Earnings, and August Nonfarm Payrolls are important releases.
As the Canadian dollar (CAD) struggles due to the possibility of a September interest rate drop by the Bank of Canada (BoC), the USD/CAD pair also finds support. According to Reuters, traders are now pricing in a nearly 55% possibility that the Canadian central bank would lower rates in its upcoming decision, up from about a 40% chance the previous week.
