USD/CAD eases below 1.2700 as USD retreats, Canadian GDP eyed
- USD/CAD edges lower in the Asian session on Friday amid corrective pullback.
- BOC early rate hike expectation, oil price recovery influences the loonie’s performance.
- The US Dollar Index remains strong near 94.30 despite mild correction of late.
The USD/CAD pair remains muted on the last trading day of the week. The pair recorded a fall from the high above 1.2750 in a total of nearly 130-pips movement in the overnight session and remained poised to close the week on minimal gains. At the time of writing, USD/CAD is trading at 1.2679, up 0.01% for the day.
The depreciative move in the US dollar keeps USD/CAD on the lower grounds. The US Dollar Index (DXY), which measures the performance of the greenback against its six major rivals, trades at 94.27, down 0.08%. The buck tracks the lower US 10-year benchmark Treasury yields at 1.49% with 2.26% losses.
Investors digested the Fed tapering expectations as soon as November amid rising inflation and rate hike next year. The Fed Chair Jerome Powell retreated his view on the longer than expected inflationary concerns but also considered them transitory. Furthermore, the US Senate Leader Chuck Schumer said on Thursday that an agreement has been reached to extend government spending until December 3rd. On the economic data side, the US Initial Jobless Claims unexpectedly jumped to 362K against the market expectations of a decline to 335K whereas the Gross Domestic Product (GDP) was revised marginally higher for Q2 at 6.7% in Q2.
On the other hand, the loonie gained some traction on the back of early rate hike expectations from the Bank of Canada (BOC) as per the Fidelity Investments portfolio Manager David Wolf. The supply constraints and higher-than-normal inflation could push the central bank to take a step forward. Additionally, higher crude oil prices also lifted the sentiment around the Canadian dollar.
As for now, traders are waiting for the US Personal Spending and Income data, PCE Price Index, ISM Manufacturing PMI, Canadian Gross Domestic Data (GDP) to take fresh trading impetus.
USD/CAD additional levels