USD/CAD pair reaches 4-day high

Key Movers

The USD regained some upward traction after notable continuous improvement in the supply chain, a softening labor market and price pressure easing on the economy. Markets are anticipating the Federal Reserve raising interest rates by 25 basis points (bps) in its upcoming meeting in May. Another driver for USD to shake off its losses from yesterday was the benchmark 10-year US Treasury bond yield climbing up to its highest level in close to a month at above 3.6%. The US dollar index (DXY) raced beyond 102.00 levels, up 0.47% reclaiming yesterday’s losses.

St. Louis Federal Reserve chief, James Bullard, told Reuters in an interview that “he leans towards 75 bps of additional tightening, versus the market consensus for one more 25 bps hike next month and then the potential for as many as two quarter-point cuts later this year.”

GBP rose by 0.8% after having dropped below the 1.24 level, erasing its losses. However, later in the trading session, the sterling came under pressure against the USD. The strong inflation data from the UK aided the pair to limit its losses. The headline UK CPI data decreased less than expected, to 10.1% year-over-year in March from 10.4% in February. High inflation may continue to put pressure on the Bank of England (BoE) to raise interest rates further. The markets are anticipating a high chance of a 25 bps hike in May.

After hitting its low of the trading day, the EUR bounced back to the mid 1.09 levels against the USD. The euro was seen under pressure against the USD despite the upward revision to Eurozone inflation numbers. The EUR remains supported by the outlook that the European Central Bank may continue with hikes in interest rates.