USD/CAD Rises Above 1.3700, Focus On US Core PCE Inflation And Canadian GDP

USD/CAD rose for the fourth consecutive day, trading around 1.3710 in the European session on Friday. Investors are awaiting the release of the core PCE price index on Friday, which is expected to fall to 2.6% year-on-year from 2.8% previously. The data is considered the preferred inflation indicator of the Federal Reserve (Fed).

Rising US Treasury yields supported the US dollar (USD) and supported the rise in USD/CAD, which may be attributed to risk aversion after the release of US GDP data on Thursday. US GDP grew 1.4% year-on-year in the first quarter, slightly higher than the previous reading of 1.3%, but still the slowest growth since the economy contracted in the first half of 2022.

The US dollar index (DXY), which measures the value of the US dollar against six other major currencies, remained above 106.00, and the yields on 2-year and 10-year US bonds were 4.72% and 4.29% respectively at press time.

Michelle Bowman, a member of the Federal Reserve (Fed) Board of Governors, noted on Thursday that she is still not ready to support the central bank to cut interest rates while inflationary pressures remain high. Bowman added: “We are still not at a point where it would be appropriate to lower policy rates and I continue to see some upside risks to inflation.

For the Canadian dollar (CAD), Statistics Canada will release the country’s gross domestic product (mo/m) later in the North American session. Canada’s economy is expected to grow 0.3% in April, compared with 0.0% in March.

Given that Canada is the largest oil exporter to the United States, rising crude oil prices limited the downside for the commodity-linked Canadian dollar. West Texas Intermediate (WTI) crude oil prices extended gains for the third consecutive day, trading around $81.90 in the European session on Friday. Oil prices rose for the third consecutive week, boosted by supply threats caused by escalating conflicts in the Middle East.

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