USD/CAD trades without a clear direction on Wednesday, hovering around 1.3700 at the time of writing, as investors balance persistent US Dollar (USD) strength against support for the Canadian Dollar (CAD) from elevated Oil prices.
The pair remains close to its four-week highs, supported by rising US yields and a reassessment of Federal Reserve (Fed) policy expectations
Inflation concerns continue to dominate financial markets. Geopolitical tensions in the Middle East and stalled negotiations between the United States (US) and Iran are keeping Oil prices elevated, fueling fears of more persistent global inflation. This backdrop is prompting major central banks to maintain restrictive monetary policy for longer than previously expected.
In the United States, the Producer Price Index (PPI) accelerated to 6% YoY in April from 4.3% previously, reaching its highest level in four years and beating market expectations by a wide margin. The core PPI, which excludes volatile components, rose 5.2% YoY after 4% in March. These figures follow Tuesday’s Consumer Price Index (CPI) release, which had already shown stronger-than-expected consumer inflation.