USD/CAD retraces its recent losses amid stable oil prices, improves to near 1.3350

• USD/CAD attempts to gain ground on stable Crude oil prices.
• WTI price holds ground on the uncertainty around the Israel-Gaza conflict.
• Fed members emphasize flexibility in monetary policy; triggering a risk-on sentiment.

USD/CAD consolidates near 1.3350 during the Asian session on Tuesday, attempting to retrace its recent losses registered on Monday. The Canadian Dollar (CAD) could have some balance on steady Crude oil prices.

West Texas Intermediate (WTI) price hovers near $71.00 per barrel, by the press time. The Crude oil prices move sideways on fears over the escalation of the Israel-Gaza war into a regional conflict. US Secretary of State Antony Blinken arrived in Tel Aviv to discuss on communication with Arab leaders.

The upcoming releases of Canadian International Merchandise Trade Balance and Building Permits on Tuesday provide insights into Canada’s economic performance. A forecasted decline in the Canadian International Merchandise Trade Balance from 2.97 billion to 2.0 billion for November suggests a potential shift in the imports and exports of Canadian goods.

Furthermore, the anticipated decrease in Canadian November Building Permits from 2.3% to 2.0% indicates a potential moderation in construction activities. Construction data is closely monitored as it reflects broader trends in the real estate and housing sectors, contributing to the movement of corporate investments, which tends to cause some volatility to the CAD.

The cautious stance expressed by Atlanta Fed President Raphael W. Bostic and US Fed Governor Michelle W. Bowman has implications for market sentiment and the US Dollar (USD). Bostic’s anticipation of two quarter-point cuts by the end of 2024 reflects a proactive approach in response to the decline in inflation, indicating a willingness to use monetary policy tools to support the economy.

Bowman’s acknowledgment that the current policy stance appears sufficiently restrictive but also considering the possibility of lowering the Fed’s policy rate if inflation moves closer to the 2% target adds to the dovish sentiment. This stance emphasizes flexibility in monetary policy, triggering a risk-on sentiment. Investors may seek higher-yielding assets, potentially putting downward pressure on the US Dollar.