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USD/CAD side-steps geopolitical geopolitical volatility to trade little changed

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USDCAD News

Fundamental Analysis

USD/CAD is trading in the 1.3750s after edging lower on Friday.

USD/CAD avoids the worst excesses of volatility in markets from the reported retaliation of Israel against Iran. The flight to safety boosted the US Dollar but the Canadian Dollar benefited equally from surging Oil prices. Interest rate differentials remain a bullish factor for the pair as the Fed delays expected interest rate cuts. The pair has been shielded by the worst excesses of volatility witnessed in markets brought on by the escalating geopolitical situation in the Middle East.

The reason for this is the diverging outlook on the future path of interest rates in the US and Canada. Interest rates are a key FX driver because global capital tends to flow to where interest rates are higher all other things being equal. This has supported the US Dollar most recently during its early April rally and provided a bullish backwind for USD/CAD.

 

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USD/CAD trims gains after Iranian media denies any attack, remains below 1.3800USD/CAD pares its intraday gains, trading around 1.3780 during the Asian session on Friday.
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