USD/CAD eyes 1.2600 as tightening oil supply fears intensify

• USD/CAD has tumbled below 1.2700 amid higher oil prices on an escalation in sanctions on Russia.
• The loonie has also been dumped after the safe-haven assets lose their appeal.
• OPEC meeting to fix the demand-supply imbalance in oil will remain in focus.

The USD/CAD pair has shrugged off its gains in Thursday’s trading session and has tumbled below 1.2700 despite the unavailability of a material outcome from the Russia-Ukraine peace talks on Monday. This has been considered as a tiny step towards a ceasefire and safe-haven assets have lost their ground. However, the oil prices have remained flat around $96.00 as sanctions on Russia are set to tighten the oil supply in an already tight environment.

Earlier, the sanctions imposed on Russia by the Western leaders in response to its arbitrariness of invading Ukraine had crippled their SWIFT international banking infrastructure. The oil prices were boiling and rided near $100.

Meanwhile, the OPEC meeting on Wednesday whose agenda should be fixing the demand-supply imbalance will provide further guidance for the oil prices. The oil cartel looks to add up the total global supplies higher than the stipulated increment of 400k barrels per day (BPD) in April.

The US, being the largest importer of oil from Canada seems to face serious cash outflows amid rising oil prices, which has underpinned the Canadian dollar against the greenback.

The US dollar index (DXY) has lost its ground amid a risk-off impulse in the market, which has also strengthened the Canadian dollar against the American one.

Majorly, the headlines from the Russia-Ukraine war will remain the major driver for the loonie but investors will also focus on the Manufacturing Purchasing Managers Index (PMI) data by the US Institute for Supply Management (ISM), which is due on Tuesday.