USD/CAD Gains Traction for Two Straight Days but Fails to Maintain the Traction.

The USD/CAD pair entices some dip-buying in the mid-1.3600s and sticks to modest intraday gains in the first half of the European session. Within this week’s broader trading band, USD/CAD maintains its bid tone for the second consecutive day and is presently trading just above the 1.3700 mark.

Multiple factors pull the US dollar to a one-week drop, consequently pulling down the USD/CAD pair. Notably, the effect of the UK central bank’s decision to tackle inflation drags the benchmark 10-year US Treasury note from a 12-year high touched on Wednesday. In addition, a goodish recovery in the global risk sentiment further weighs on the USD’s haven.

The commodity-linked loonie is undermined by the subdued price action around crude oil prices and continues to lend some support to the USD/CAD pair for the time being. Concerns that a deeper global economic downturn will affect fuel demand offset global supply concerns and fail to assist the crude oil in capitalizing on this week’s goodish recovery from the lowest level since January 2022.

Furthermore, the anticipations for a more violent policy tightening by the Fed should limit the fall in the US bond yields and favors the USD bulls.

Investors are confident that the US central bank will hike interest rates faster to tackle inflation. Therefore, the focus is on publishing the US Personal Consumption Expenditures (PCE) – the Fed’s preferred inflation gauge.

The publication of the Chicago PMI and the revised Michigan Consumer Sentiment Index is shown by Friday’s US economic docket. The data, the US bond yields, and the broader risk sentiment will influence the USD and provide new motivation for the USD/CAD pair. In addition, traders will further take signs from oil price dynamics to take short-term opportunities on the last day of the week.