USD/CAD climbs to 1.3370 as WTI drops below $47 on OPEC headlines
- WTI loses traction, falls toward $47 in American session.
- US Dollar Index rebounds following sharp drop on Fed's emergency cut.
- Focus shifts to BoC's interest rate decision on Wednesday.
The USD/CAD pair slumped to a daily low of 1.3320 during the early trading hours of the American session after the greenback came under strong selling pressure on the Federal Reserve's emergency rate cut. However, with crude oil prices turning south later in the session, the pair reversed its direction and climbed into the positive territory. As of writing, the pair was up 0.35% on the day at 1.3370.
Following an emergency meeting on Tuesday, the FOMC has decided to lower its policy rate by 50 basis points to help the economy counter the negative impact of the coronavirus outbreak on the economic activity. The US Dollar Index (DXY) dropped toward the 97 handle with the initial market reaction before recovering a portion of its losses. At the moment, the DXY is still down 0.32% at 97.20.
Falling crude oil prices weigh on CAD ahead of BoC
On the other hand, the barrel of West Texas Intermediate (WTI), which extended its rebound to $48.65 earlier in the day, erased its daily gains after a Reuters report poured cold water on hopes for an OPEC+ output cut of one million barrels per day.
Citing two sources, Reuters said OPEC+ panel has recommended to cut the production by 600,000 barrels per day in the second quarter and extend the existing cuts to the end of the year. The WTI was last seen trading at $46.70, erasing 1.7% on a daily basis.
On Wednesday, the Bank of Canada will announce its rate decision and publish its policy statement.
Previewing this event, "markets have now fully priced in a rate cut for March, and with recent developments we believe that the cost of disappointing the market would be unpalatably high for the BoC," TD Securities analysts said. "Although their preference may be to wait until they have a full forecast in hand to act, we now believe that the BoC will cut rates by 25 bps at tomorrow's meeting.”
Technical levels to watch for