USD/CAD remains modestly higher for a third consecutive session, trading close to the 1.3890 level during early Asian trading on Thursday. The pair continues to find support from a firmer US Dollar (USD), backed by stronger-than-expected US economic data. Market participants now turn their attention to the weekly US Initial Jobless Claims release later in the day, along with comments from Federal Reserve officials.
On Wednesday, the US Census Bureau reported that Retail Sales rose by 0.6% in November to $735.9 billion, rebounding from a 0.1% decline in October and surpassing market expectations of a 0.4% increase. In addition, November’s Producer Price Index (PPI) surprised to the upside, with both headline and core inflation accelerating to 3% year-over-year.
Combined with last week’s data showing the US Unemployment Rate easing to 4.4% in December, these figures strengthen the argument for the Federal Reserve to keep interest rates unchanged in the near term, providing ongoing support to the USD. Reflecting this shift, Morgan Stanley analysts have pushed back their expectations for rate cuts to June and September, from earlier projections of January and April, following the latest US jobs report.
However, gains in USD/CAD may be capped as the commodity-linked Canadian Dollar (CAD) draws support from firmer oil prices, given Canada’s role as a major crude exporter to the United States. At the time of writing, West Texas Intermediate (WTI) crude is trading around $60.20. Oil prices remain supported by persistent tensions in Iran, with traders closely watching geopolitical developments linked to ongoing civil unrest.
