• USD/CAD under pressure due to hotter Canadian CPI.
• Commerz bank : Loonie will continue to struggle to make significant gains against the USD.
• Oil prices rise as market focus on supply drop from Russia, Libya.

The US dollar traded low against the Canadian dollar during Thursday due to upbeat CPA data. The Canadian Consumer Price Inflation figures for March saw the YoY rate of headline price growth accelerate to 6.7% from 5.7% in February. Core measures all also saw larger than expected MoM which came at 1.4% and YoY jumps. The upbeat data boosted the expectations that the BoC will follow up last week’s 50 bps rate hike with more hikes of a similar margin at upcoming meetings.

As per the economists at Commerzbank report “On the market more than 75bp are already priced in for the OIS-based rate expectations over the 3-month horizon – i.e. the next two BoC meetings. Depending on whether the US central bank or the ECB is used as a benchmark this seems rather disappointing or quite attractive.”

“The loonie will continue to struggle to make significant gains against the USD even if the market increasingly expects one or more 50bp BoC steps. On the other hand, further CAD-gains against the euro seem possible, in particular in view of the continued war in Ukraine.”

Meanwhile. the rising oil prices favors the Canadian dollar. Oil price is firmer due to a potential European Union (EU) ban on Russian oil came to the fore, days after diminished supplies from Libya rocked the market. As per the Analysts, market volatility is likely to pick up again soon, with the EU still weighing a ban on Russian oil for its invasion of Ukraine, which Moscow calls a “special military operation”.

Libya, a member of OPEC, on Wednesday said the country was losing more than 550,000 barrels per day of oil output due to blockades at major fields and export terminals. The demand outlook in China continues to weigh on the market, as the world’s biggest oil importer slowly eases strict COVID-19 curbs that have hit manufacturing activity and global supply chains.

USD/CAD 4 Hour Chart:

Support: 1.2437 (S1), 1.2379 (S2), 1.2285 (S3).

Resistance: 1.2589 (R1), 1.2683 (R2), 1.2741 (R3).

Amidst all the catalysts creating cautious optimisms for Canadian dollar, we expect a bearish trend for USD/CAD.