Bullish crude prices and strong Canadian jobs data support the Canadian dollar, offsetting modest USD strength ahead of key US inflation data.
The USD/CAD pair remains below the mid-1.3900s, near a two-month low reached last week, as traders await US inflation figures. Bullish oil prices, driven by geopolitical tensions in the Middle East and supply concerns, underpin the commodity-linked Canadian dollar.
Canada’s stronger-than-expected employment report last Friday added support to the Loonie, though a modest rebound in the US dollar limits further downside. Markets are pricing in a potential Fed rate hike by year-end due to inflation risks tied to volatile oil prices.
Traders are cautious ahead of Wednesday’s US Consumer Price Index and Thursday’s Producer Price Index, which could clarify the Fed’s policy path. The mixed fundamental backdrop keeps directional bets subdued.