USD/CAD stays firmer around 1.2650 on weaker oil, firmer USD theory, BOC eyed

USD/CAD bulls take a breather following a stellar daily performance.
US dollar benefits from risk-off mood, tracks Treasury yields to north on covid, stimulus woes.
BOC is expected to stand pat but comments over economic transition will be the key, Ivey PMI, Fedspeak also decorate calendar.

USD/CAD edges higher around 1.2645 during Wednesday’s Asian session. In doing so, the loonie pair await the key catalysts, namely the Bank of Canada (BOC) monetary policy meeting, while probing the bulls after the heaviest jump in three weeks.

The return of the US and Canadian traders failed to get a warm welcome amid escalating virus woes and economic fears. While the risk-off mood underpinned the US dollar, downbeat oil prices exert additional downside pressure on the USD/CAD prices ahead of the BOC announcement. On the same line were fears of a bumpy road to the US stimulus.

The US marked a doubling of the virus-led hospitalizations in a year and a 67% hike in the covid-led deaths in the last two weeks than the previous period, per data from Washington Post (WaPo) and Reuters. ”It is an illustration of how the delta variant has hampered progress in curbing the pandemic even as vaccines became widely available,” the WaPo wrote.

On the other hand, CNN came out with the news suggesting further hardships for the Democratic party-backed stimulus as it reaches the House. The news said, “House Republicans could face increased pressure to vote against a bipartisan infrastructure package when they return to Washington later this month.”

The US 10-year Treasury yields benefited from the risk aversion wave and crossed the last month’s high, underpinning the US Dollar Index (DXY) to print the biggest daily jump since August 19. Also portraying the sour sentiment were the Wall Street benchmarks, followed by a mildly offered S&P 500 Futures.

It’s worth noting that the virus-led economic fears joined price-negative updates for oil to portray WTI’s third daily fall, exerting downside pressure on the USD/CAD prices.

Moving on, Canada’s Ivey Purchasing Managers Index for August, prior 59.8, will precede comments from the Fed New York President John C. Williams to entertain USD/CAD traders. However, the BOC announcements will be more important to watch. The Canadian central bank is expected to keep interest rates on hold at a record low of 0.25% and to wait until October before cutting its bond purchases further, a Reuters poll of economists showed.