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The US dollar fell against the Canadian dollar today, touching near 1.3680, as market sentiment shifted on the likelihood of further Federal Reserve interest rate hikes. Analysts attribute the softer stance on the US dollar to a combination of factors, including recent economic indicators and market expectations.
The University of Michigan's Consumer Sentiment Index released recently pointed to higher inflation expectations among consumers, which typically would support a stronger dollar due to the anticipation of more aggressive monetary policy. However, this has been counterbalanced by other economic reports suggesting a potential slowdown.
On Friday, revised perceptions of inflation were evident as US Treasury yields ticked up. Yet, despite this uptick, durable goods orders in the US saw a significant drop, while jobless claims fell to 209,000 just before Thanksgiving Day when markets were closed. The reduced number of jobless claims could be seen as a positive sign for the labor market; however, it did not seem to bolster the case for further rate hikes.
Adding to the complexity is the Canadian economic landscape. While the Canadian dollar found some support from these broader market movements, its gains were capped by falling oil prices. West Texas Intermediate (WTI) crude prices declined amidst uncertainties surrounding an OPEC+ meeting, which can have a substantial impact on resource-linked currencies like the Canadian dollar.
Investors are now turning their attention to upcoming economic data for further direction. Retail sales figures from Canada are awaited with interest, potentially affecting the strength of the CAD. Meanwhile, in the United States, post-Thanksgiving S&P Global PMI figures will be closely watched to gauge business activity levels and economic health.
As global markets adjust to these mixed signals, traders remain cautious. The interplay between commodity prices, such as oil, and shifting monetary policy expectations continues to create a complex trading environment for currency pairs like USD/CAD.
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