The USD/CAD pair edges upward towards the key psychological level of 1.4000 during afternoon trading in North America on Thursday. The Loonie pair continues to move higher even as the US Dollar (USD) experiences a decline following the publication of the United States (US) Producer Price Index (PPI) data for April.
The USD/CAD currency pair is inching closer to the significant threshold of 1.4000 during trading hours in North America on Thursday. Despite a decrease in the value of the US Dollar (USD) after the release of the United States (US) Producer Price Index (PPI) data for April, the Loonie pair is still gaining momentum.
The US Dollar Index (DXY), which measures the strength of the Greenback against top six currencies, has dropped by 0.3% and currently hovers around 100.70. According to the US Bureau of Labor Statistics (BLS), there has been an unexpected drop in the cost of goods and services for business owners on a monthly basis. Both the headline and core PPI have decreased by 0.5% and 0.4%, respectively.
In the past year, the headline PPI has only increased by 2.4%, lower than the estimated 2.5% and the previous reading of 2.7%. Similarly, the core PPI – which does not include volatile items like food and energy – has also slowed down to 3.1%, in line with expectations, from the previous reading of 4%. The soft PPI data from the US has raised the possibility of interest rate cuts by the Federal Reserve (Fed) in the near future. However, this relief may be short-lived as consumer inflation expectations are still high due to the impact of tariffs imposed by US President Donald Trump.
In contrast, the Canadian Dollar (CAD) has been struggling due to a significant drop in oil prices. The currency has been facing pressure as market expectations increase that the Bank of Canada (BoC) may resume its monetary expansion cycle, which was halted in April amidst global economic uncertainty caused by trade tariffs imposed by the US. Furthermore, dovish speculations from the BoC have been fueled by a rise in the Unemployment Rate.