USD/CAD drifts lower to 1.3472 amid the modest USD decline.
US GDP expanded at a 3.3% annualized rate in the fourth quarter of 2023, stronger than expected.
A rise in oil prices amid Middle East geopolitical tensions might lift the commodity-linked Loonie.
The USD/CAD pair trades in negative territory for the second consecutive day during the early Asian trading hours on Friday. The release of the Core Personal Consumption Expenditures Price Index (Core PCE) for December, the Fed’s preferred inflation measure, will be a closely watched event on Friday. At press time, USD/CAD is trading at 1.3472, losing 0.01% on the day.
The Commerce Department reported on Thursday that the US economy grew stronger than expected in the final three months of 2023. The Gross domestic product (GDP) grew at a 3.3% annualized rate in the fourth quarter of 2023, compared to 4.9% in the previous reading. In response to the upbeat data, US Treasury yields edged lower. The markets continued to reflect the Fed's chances to begin its first-rate cuts in May. According to the CME FedWatch Tool, the odds of a March cut stand at 47.4%.
Additionally, the Labor Department showed that the US Initial Jobless Claims for the week ending January 20 totaled 214,000 from 189,000 in the previous week, worse than the market expectation of 200,000. Continuing Claims rose to 1.833 million from the previous reading of 1.806 million.
On the Loonie front, the Bank of Canada (BoC) held its key overnight rate at 5.0% on Wednesday, keeping its benchmark the same for the fourth time in a row. Despite that potential shift in message from how high to how long, the BoC is not saying interest rates will be lower soon, given continued concern about inflation.
Meanwhile, the higher oil prices due to the geopolitical tensions in the Middle East and the disruption of shipping in the Red Sea might boost the commodity-linked Canadian Dollar (CAD).
Market players will keep an eye on the December Core Personal Consumption Expenditures Price Index (Core PCE) on Friday. Also, the Pending Home Sales will be released. These data could give a clear direction to the USD/CAD pair
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