USD/CAD rises to 1.3600 in fifth day of gains

The US and Canadian economies appear to be heading in the opposite directions and that’s lifted USD/CAD to a three-week high.

The pair is up 30 pips to 1.3601 today in the fifth day of gains. The latest push saw the pair edge above offers at 1.3600 that restrained the pair in early European trade.

The rally in the pair is coming despite the big tailwind from oil markets, which have rallied on Middle East fighting and China stimulus. We could also be seeing some real-money flows from CAD into USD today after Canadian Natural Resources bought a large position in the Canadian oil sands from Chevron for $6.5 billion.

In the bigger picture, much of this move has been driven by the US dollar side of the equation and is part of a broader trend of dollar strength. Friday’s non-farm payrolls report was stronger than anticipated and US data has been good since the Fed cut 50 bps. That’s seen the probability of the Fed going to the sidelines in November rise to 15% and the terminal Fed funds rate priced at 3.35% from 2.80%.

In Canada, the picture is worsening and Bank of Canada officials have been hinting at the possibility of a 50 bps cut in October, though the market has it still at only 18%.

This article was written by Adam Button at www.forexlive.com.