The USD climbed to a two year high after aggressive Fed rate hike bets. However, the USD remained stable.

The intraday positive movement was not affected by an increase in oil prices.

USD/CAD rose around 80 pips to the daily low, and then climbed to the 1.2845-1.28850 region or a new six-week high during half of the European session.

After a dip to the 1.2780-1.2775 area, the USD/CAD pair gained traction on Wednesday. It turned positive for the fifth consecutive day thanks to US dollar buying interest. The deteriorating global economy outlook and rising bets for Fed tightening was a further tailwind to the dollar.

Investors expect the Fed to increase interest rates 50 bps at its four next meetings in May June July August and September. Recent hawkish comments made by prominent FOMC members, including Fed Chair Jerome Powell, reaffirmed these expectations. Fears of global slowdown have been raised by the prolonged Russia-Ukraine conflict as well as the recent COVID-19 epidemic in China.

To a greater extent, the supporting factor helped offset an increase in crude oils prices. This tends to benefit commodity-linked loonies. According to Poland and Bulgaria, Russia will cease supplying gas from Wednesday. Russia's threat to stop gas supplies to European countries who refuse to pay in roubles for fuel has sparked fears that Russia might follow through. These fears, together with the hope for more Chinese economic stimulus, have fueled crude oil prices.

Bullish traders are still favoured by dip-buying and acceptance of dips above the 1.2800 level. It is possible that some follow-through strength will be shown towards the 1.2900 round figure for the YTD peak. Market participants are now looking forward to second-tier US data which, together with market risk sentiment, will impact the USD. To take advantage of short-term opportunities, traders will also look to the USD/CAD exchange rate dynamics.