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    USD/CAD inter-markets: games of reluctance

    USD/CAD is trading on a firmer note at the end of the week, looking to revert part of the weekly leg lower from Monday’s peaks above the 1.3100 handle.Despite ‘Brexit’ concerns seem to have ebbed somewhat throughout the week, CAD remained quite isolated from the global concerns after the UK has decided to leave the European Union.In fact, CAD keeps looking almost exclusively to crude oil dynamics when comes to determine the currency’s direction, relegating the US-CAD spread differentials to the passenger’s seat. Despite the demand for the black gold is in fact vulnerable to economic consequences of the ‘Brexit’ vote, its ultimate impact on CAD remains indirect.Today’s performance of Canadian and US money markets are seeing benchmark yields trading in the lower end of the range, while volatility gauged by VIX dropped to multi-day lows confirming the now better sentiment in the risk-associated space.On the US-side of the equation, the greenback – when tracked by the US Dollar Index (DXY) - keeps struggling to sustain a break above the 96.00 mark, undermining part of the pair’s upside potential. In the same line, the future steps of the Federal Reserve have been placed in the back burner for the time being and in light of the recent events in the UK, however markets seem to have already priced in a no-hike at least until December. According to CME Group’s FedWatch tool, the probability of a hike in December is just above 13%.All in all, the performance of the West Texas Intermediate appears as the top mover for CAD, at least until yields spread differentials regain some lost relevance. Relevant levels on the upside emerge in the 1.31/1.32 band – peaks since mid-May, while the mid-1.2600s has been a decent support in recent weeks.

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