USD/CAD gains ground below the mid-1.3200s on a modest US Dollar recovery
- USD/CAD attracts some buyers around 1.3230 on the modest USD rebound.
- A decline in oil prices weighs on the commodity-linked Loonie.
- The US Initial Jobless Claims figure for the third week of December fell short of expectations.
- Traders await the December’s Chicago Purchasing Managers' Index (PMI).
The USD/CAD pair recovers some lost ground during the Asian session on Friday. The rebound of the pair is supported by the modest gains of the US dollar (USD) and a decline in oil prices. However, the bearish outlook of USD/CAD remains intact as the pair holds below the key 100-day Exponential Moving Average (EMA) on the daily chart. USD/CAD currently trades near 1.3230, up 0.02% on the day.
Oil prices continue to drop on Friday due to concerns about supply disruptions. This, in turn, exerts some selling pressure on the commodity-linked Loonie.
The Bank of Canada (BoC) suggested in the statement at its December meeting that the governing council felt more optimistic about the nation's inflation outlook and opened the door for additional rate hikes. However, the November Consumer Price Index (CPI) did not slow down, which might offer some hints that the odds of another interest rate hike have fallen.
On the other hand, investors expect interest rate cuts in the US next year. The Federal Reserve (Fed) maintained rates unchanged at 5.25%-5.50% at its last meeting of the year. Fed Chair Jerome Powell stated that the timing of rate cuts would be the Fed's "next question.” The shift of the Fed's stance to dovish has dragged the Greenback lower across the board and sent bond yields lower.
The US Department of Labor revealed on Thursday that the weekly Initial Jobless Claims figure fell short of expectations, coming in at 218K for the week ending December 23 from the previous week's figure of 206K, below the projected 210K. Meanwhile, Pending Home Sales in the United States remained flat at 0%, weaker than the estimation of 1.0%.
The Chicago Purchasing Managers' Index (PMI) for December will be published later on Friday from the US docket, and it is expected to decline from 55.8 to 51.0. The market has another quiet session as traders enter holiday mode heading into 2024.