The USD/CAD exchange rate has paused its recent upward trend, trading around 1.3720 during the Asian session on Friday. This shift is attributed to the Canadian Dollar (CAD) gaining traction due to a favorable risk-on environment following stronger-than-expected US Retail Sales data, which has alleviated concerns about a potential recession in the United States.
The CAD, which is sensitive to commodity prices, may continue its upward trajectory as crude oil prices are set to close the week on a high note. This positive momentum follows recent US economic reports that have fueled optimism about demand in the world’s leading oil-consuming country. Canada, being the largest crude exporter to the US, stands to benefit. At the time of writing, West Texas Intermediate (WTI) crude oil is priced near $76.60 per barrel.
In the US, market participants are awaiting the release of the preliminary Michigan Consumer Sentiment Index for August and Building Permits data for July later in the North American session on Friday.
The US Dollar (USD) has experienced a decline as traders have fully factored in a 25 basis point interest rate cut by the US Federal Reserve for September. However, there remains a 26% chance of a 50 basis point reduction, according to the CME FedWatch tool.
Despite this, the Greenback found some support from recent positive US economic data. The US Census Bureau reported a 1.0% month-over-month increase in Retail Sales for July, reversing June’s 0.2% decline and surpassing the anticipated 0.3% rise. Additionally, Initial Jobless Claims for the week ending August 9 fell to 227,000, better than the forecasted 235,000 and down from 234,000 the previous week.
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