During the European session on Friday, the USD/CAD pair maintained its upward trajectory, hovering around 1.3710. Investors are eagerly awaiting the release of the Core PCE Price Index inflation data, a key indicator closely monitored by the Federal Reserve (Fed).
The Core PCE Price Index is anticipated to show a year-over-year decrease to 2.6% from the previous 2.8%, reflecting the Fed’s preferred measure of inflation. This data is pivotal as it influences the Fed’s monetary policy decisions.
The recent strength in the US Dollar (USD) can be attributed to higher yields on US Treasury bonds, which currently stand at 4.72% for the 2-year yield and 4.29% for the 10-year yield. This increase in yields has bolstered the USD and provided support to the USD/CAD pair.
Thursday’s US Gross Domestic Product Annualized report showed a slight expansion of 1.4% in Q1, slightly above the previous reading of 1.3%. However, this growth rate indicates the slowest expansion since the economic contractions observed in the first half of 2022, contributing to a cautious market sentiment.
Federal Reserve Board member Michelle Bowman’s comments further underscored a cautious approach towards rate cuts, citing persistent inflation pressures. Her remarks emphasized that it is premature to consider lowering the policy rate, reinforcing market expectations.
On the Canadian Dollar (CAD) front, Statistics Canada is scheduled to release the country’s GDP (MoM) data later in the North American session. Expectations are for a 0.3% growth in April, following neutral growth in March.
The CAD’s downside is limited by higher crude oil prices, with West Texas Intermediate (WTI) crude trading near $81.90 per barrel. Canada’s status as a major oil exporter to the US supports the CAD amid ongoing supply concerns driven by geopolitical tensions in the Middle East.
As markets await key economic data releases from both the US and Canada, the USD/CAD pair remains influenced by evolving economic indicators and geopolitical developments impacting oil markets.
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