USD/CAD rebounds from 1.3340 despite oil recovery and hawkish BoC policy

• USD/CAD has shown recovery to near 1.3360 despite a correction in the USD Index.
• The BoC surprisingly raised interest rates due to resilience in the Canadian economy.
• The oil price has renewed its three-day high at $73.20 as various state-run banks in China have slashed their lending rates.

The USD/CAD pair has witnessed buying interest around 1.3340 in the last London session. The Loonie asset has rebounded to near 1.3360 despite a solid recovery in the oil price and soaring expectations of one more interest rate hike from the Bank of Canada (BoC).

S&P500 futures are holding nominal losses in the European session, portraying a cautious market mood. The risk profile has turned filthy as investors are anticipating that the Federal Reserve (Fed) will not pause its policy-tightening spell. Earlier, Fed chair Jerome Powell announced that further interest rate hikes are less certain as tight credit conditions by United States’ regional banks are effecting barricading inflation from showing true colors.

The US Dollar Index (DXY) is consistently contracting right from the first tick made on Thursday. On a broader note, the USD Index is demonstrating topsy-turvy moves in a wide range amid an absence of a potential trigger this week. Investors are preparing for the US Consumer Price Index (CPI) (May) data, which will be announced on Tuesday.

The Canadian Dollar is struggling to dominate the US Dollar despite a surprise rate hike announcement by the Bank of Canada (BoC). BoC Governor Tiff Macklem raised interest rates surprisingly by 25 basis points (bps) to 4.75%. Considering the resilience of the Canadian economy due to a solid labor market, and consumer spending, current monetary policy not remained restrictive enough to tame stubborn inflation.

The BoC has kept doors open for further interest rate hikes if inflation continues to remain persistent.

Meanwhile, the oil price has renewed its three-day high at $73.20 as various state-run banks in China have slashed their lending rates for supporting the economic recovery. It is worth noting that Canada is the leading exporter of oil to the United States and higher oil price supports the Canadian Dollar.