Canadian Dollar Falls as USD/CAD Rally Continues

Key Moments:

USD/CAD Extends Upside Momentum

USD/CAD attracts buyers for a third straight session on Friday. As a result, the pair climbs to a new weekly high above the mid-1.3600 region during early European trading. Traders are positioning ahead of key economic releases from the United States and Canada.

US Dollar Supported by Inflation Concerns and Fed Outlook

The US Dollar remains firm as inflation concerns persist. Higher energy prices linked to geopolitical tensions may keep price pressures elevated. Because of this, markets expect the Federal Reserve to delay interest-rate cuts.

Attention now turns to the US Personal Consumption Expenditures (PCE) Price Index. This report is the Fed’s preferred inflation measure. However, analysts expect only a limited market reaction unless the data surprises strongly.

In addition, Friday’s US calendar includes Durable Goods Orders, JOLTS Job Openings, and the Preliminary Michigan Consumer Sentiment report. Together, these indicators may influence short-term moves in the US Dollar and USD/CAD.

Canadian Dollar Pressured by Oil Pullback and Data Anticipation

Meanwhile, falling crude oil prices weigh on the commodity-linked Canadian Dollar. Oil often supports the Loonie because Canada is a major energy exporter.

At the same time, the US Dollar trades near levels last seen in late January. Markets have also reduced expectations for Fed rate cuts. Therefore, stronger USD demand continues to support USD/CAD.

However, supply risks in global energy markets could still support oil prices. If oil rebounds, the Canadian Dollar may find support and limit further gains in USD/CAD.

Later in the North American session, Canada will release its monthly employment report. This data could drive short-term volatility in USD/CAD as traders reassess the outlook for the Canadian economy.

Focus on Canadian Unemployment Rate Data

Markets are also watching Canada’s upcoming Unemployment Rate report from Statistics Canada. This indicator measures unemployed workers as a percentage of the labor force. Because of this, it serves as a key gauge of labor market health.

A rising unemployment rate often signals slower economic growth. In contrast, a lower reading usually supports the Canadian Dollar. Therefore, traders closely monitor this data for clues about future economic momentum.