USD/CAD made its biggest jump in a month yesterday but is giving some back today. The mood has improved slightly since the release of several US economic data points, including a strong initial jobless claims reading.
That's diminished concerns about a hard landing in the global economy and one of the beneficiaries is oil. Crude fell to $78.13 earlier but it's just rebounded back over $80. It will remain in focus with weekly US oil inventories coming up at the bottom of the hour.
USD/CAD fell as oil rebounded with the pair now about 50 pips below the session high of $1.3520.
I spoke with Reuters yesterday about the loonie and the situation around global growth. The market is trying to find the balance between falling inflation due to softening growth and a hard landing. The market is getting more confident that inflation is trending down and now the worry is that growth is slowing too quickly.
Like many trades, the loonie needs to be right in the middle to prosper. That's what the Fed and many central banks are predicting but the bond market is less convinced. The Fed funds futures curve is pricing in rates at 4.38% at year end compared to 4.90% in March.