USD/CAD tumbles to near 1.2800 despite hawkish FOMC minutes, oil jumps

• USD/CAD has slipped at around 1.2800 as the DXY has weakened in a positive market mood.
• Oil prices have surged higher as demand worries have diminished in China.
• All Fed policymakers were in favor of featuring the jumbo rate hike.

The USD/CAD pair has witnessed a steep fall after failing to cross 1.2820 in the Asian session. The pair is eyeing a slippage below 1.2800 as the US dollar index (DXY) has been dumped by the market participants despite the release of an extremely hawkish Federal Open Market Committee (FOMC) minutes on Wednesday.

The FOMC minutes revealed that all FOMC members were in favor of stepping up the policy rates by 50 basis points (bps), which hints that a prolonged policy tightening environment is certain. Fed policymakers believe that the US economy needs more jumbo rate hikes as inflation is at the rooftop and the labor market is extremely tight. Therefore, the need to move back to the neutral rates is really strong. Also, the Fed sees neutral rates near 2.9%.

Meanwhile, oil prices have surpassed the crucial resistance of $110.00 as investors are expecting a recovery in the aggregate demand. A two-month-long lockdown period in Shanghai, China will be over soon and restrictions on the movement of men, materials, and machines will be withdrawn by the Chinese administration. It is worth noting that China is the largest importer of oil and demand recovery in China is sufficient to charge oil bulls.

Traders should be aware of the fact Canada is the largest exporter of oil to the US and higher oil prices will bring more fund inflows to the loonie region.