The Canadian Dollar (CAD) is poised for its fourth consecutive weekly gain, supported by a combination of broad US Dollar (USD) weakness and elevated Oil prices. As of the latest trading, the USD/CAD pair is around 1.3745, reflecting the Loonie's ongoing strength against the Greenback [1]. The US Dollar has come under significant selling pressure following the US Treasury's announcement to double its liquidity-support buybacks for longer-dated government securities to at least $4 billion per operation [1].
TD Securities notes that the USD was already nearing a bearish shift due to muted Consumer Price Index (CPI) and negative July retail sales data. The bank further states that concerns over US institutional credibility and the risk of financial repression, following the Treasury's buyback announcement, have solidified the prevailing bearish momentum for the USD [1]. Market expectations for a Federal Reserve rate hike have diminished, with the CME FedWatch Tool indicating a 65% probability that the central bank will keep rates unchanged in the upcoming month [1]. The US Dollar Index (DXY) is trading near three-month lows at approximately 98.75 [1].
Elevated Oil prices, driven in part by the ongoing US-Iran stalemate, have also provided a favorable backdrop for the CAD, given Canada's status as a major crude exporter. West Texas Intermediate (WTI) Oil is trading around $86.70 per barrel and is set for a weekly gain of more than 6% [1]. Additionally, the Canadian Dollar received a boost after US President Donald Trump announced a three-day pause on planned 50% tariffs on Canadian imports [1].
On the economic data front, Canadian Retail Sales rose by 0.6% in June, surpassing expectations of a 0.4% increase. Excluding autos, sales climbed 0.5%, also beating the 0.4% forecast, though both figures were lower than the previous month's readings [1]. Market participants are now awaiting the preliminary US S&P Global Purchasing Managers Index (PMI) report for August, which is scheduled for release later in the American trading session [1].
CONCLUSION
The Canadian Dollar's fourth straight weekly gain is underpinned by a weaker US Dollar, strong Oil prices, and better-than-expected Canadian retail sales. Market sentiment remains bearish on the USD, with diminished expectations for a Fed rate hike and ongoing geopolitical factors supporting the Loonie. Investors are closely watching upcoming US economic data for further direction.