USD/CAD skids below 1.2620 oil prices surge, BOC interest rate decision eyed

• USD/CAD has tumbled below amid the boiling oil prices.
• Investors await monetary policy announcement by the BOC.
• An interest rate hike by 50 bps is expected from the BOC.

The USD/CAD pair has seen a precipitous decline after failing to maintain a price above 1.2650 on Tuesday. On the back of a dramatic comeback in oil prices and a modest pullback in the US dollar index, bulls on the Canadian dollar have gained ground (DXY).

After plunging to a one-week low of $92.65 on Monday, oil prices have recovered significantly. The price of black gold has surpassed $100.00 after the relaxation of China's shutdown restrictions. Earlier, the Chinese government declared a state of emergency in Shanghai in order to curb the Covid-19 pandemic there. Because of limits on workers, materials, and equipment in one of the most populous cities in the world, this constituted a danger to aggregate demand in China, according to the World Bank. The easing of lockdown measures, on the other hand, has put a damper on concerns about a slide in oil demand.

Furthermore, the effect of increased oil supply by the United States government and the International Monetary Fund has been largely ignored by the oil market (IEA). The combined efforts of the United States and the International Energy Agency (IEA) will add 240 million barrels to the world oil supply in the next six months. Canada, being the world's top oil exporter to the United States, has a favorable association with the price of crude oil.

Meanwhile, the DXY has fallen to 100.24 at the time of publication, after the repercussions of the blockbuster US Consumer Price Index (CPI).

The Federal Reserve may raise interest rates by 50 basis points (bps) in May as a result of a higher than expected consumer price index (CPI) reading of 8.5 percent.

The Bank of Canada (BOC) announced its monetary policy on Wednesday, and the loonie bulls will dance to the beat of the announcement. The Bank of Canada (BOC) is expected to raise interest rates by 50 basis points (bps), which will boost efforts to keep pricing pressures in Canada under control.