USD/CAD declines towards 1.3500 on upbeat oil price, US PCE Price Index hogs limelight

• USD/CAD has registered a four-day losing streak amid a declining USD Index.
• S&P500 continued its upside momentum as investors are cheering ebbing fears of the potential banking crisis.
• Canada’s monthly GDP (Jan) is expected to expand by 0.3% vs. a contraction of 0.1%.

The USD/CAD pair has refreshed its five-week low below 1.3516 in the early Asian session amid weakness in the US Dollar Index (DXY) and rising oil prices. The Loonie asset has turned sideways after a four-day losing streak and is looking vulnerable above 1.3510. The USD Index witnessed an intense sell-off on Thursday after surrendering the critical support of 102.40. Less room for further upside in interest rates by the Federal Reserve (Fed) has built bearish bets for the USD Index.

S&P500 futures continued their upside momentum on Thursday as investors are cheering ebbing fears of a potential banking crisis, portraying a significant jump in the risk appetite of market participants.

The demand for US government bonds remained choppy as investors don’t see more casualties to the banking system. However, the 10-year US treasury yields surrendered their entire gains and settled Thursday’s session below 3.55%.

Going forward, the United States' core Personal Consumption Expenditure (PCE) Price Index data will remain in the spotlight. Analysts at CIBC expect “The Fed’s preferred gauge of inflation, core PCE prices, likely decelerated to a 0.4% monthly pace, slightly slower than its CPI counterpart given the lower weight of shelter in the index, but still too hot to reach on-target inflation, and justifying the Fed’s decision to raise rates further in March. We are roughly in line with the consensus, which should limit any market reaction.”

The Canadian Dollar will dance to the tunes of monthly Canada’s Gross Domestic Product (GDP) (Jan) data. As per the consensus, the economic data will expand by 0.3% vs. a contraction of 0.1%.

On the oil front, oil prices rose sharply above $74.00 in hopes that fewer rate hikes from western central banks collaboratively will strengthen the overall oil demand ahead. It is worth noting that Canada is the leading exporter of oil to the United States and higher oil prices will support the Canadian Dollar.