USD/CAD extends its losing streak due to higher Oil prices amid rising geopolitical tensions.
WTI price gains ground due to rising fears of a broader Middle-East conflict and the potential shutdown of Libyan Oil fields.
The US Dollar lost ground due to rising odds of a Fed rate cut in September.
USD/CAD loses ground for the third consecutive session, trading around 1.3480 during the early European hours on Tuesday. This downside of the USD/CAD pair could be attributed to the improving commodity-linked Canadian Dollar (CAD) amid rising crude Oil prices.
Crude Oil prices have surged due to concerns over potential supply disruptions, driven by fears of an escalating conflict in the Middle East and the possible shutdown of Libyan oil fields. In parallel, Hamas has rejected Israel's new conditions in ongoing ceasefire negotiations in Egypt, insisting that Israel comply with the terms set forth by US President Joe Biden and the UN Security Council.
However, US Air Force General C.Q. Brown, chairman of the Joint Chiefs of Staff, told Reuters early Tuesday that concerns about an imminent broader conflict in the region have diminished. An exchange of fire between Israel and Lebanon's Hezbollah did not escalate further.
Oil prices gained support from increasing expectations of US interest rate cuts, which could stimulate fuel demand. Lower borrowing costs are likely to boost economic activity in the United States, the world's largest Oil-consuming country.
The US Federal Reserve (Fed) Chairman Jerome Powell stated at the Jackson Hole Symposium on Friday, "The time has come for policy to adjust." However, Powell did not specify when rate cuts would begin or their potential size. According to the CME FedWatch Tool, markets are fully anticipating at least a 25 basis point (bps) rate cut by the Federal Reserve at its September meeting.
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