The USD/CAD pair is holding steady below the 1.4500 level, with the US PCE Price Index expected to provide new momentum.

USD/CAD Steady Below 1.4500 as US PCE Price Index Set to Drive Momentum

The USD/CAD currency pair is currently finding support around the 1.4470 level during Friday’s Asian trading session. It appears to have halted the previous day’s decline from its highest point since March 2020. Spot prices are trading just below the crucial 1.4500 psychological barrier and are on track to achieve significant weekly gains.

Canadian Dollar Under Pressure

The Canadian Dollar (CAD) is under sustained pressure due to the Bank of Canada’s (BoC) dovish monetary policy and ongoing concerns about potential trade tariffs from US President Donald Trump. The BoC has cut interest rates for the sixth consecutive time since June and has ceased its quantitative tightening program. Additionally, President Trump has reiterated his intention to impose 25% tariffs on Mexico and Canada, the United States’ two largest trading partners. These factors are contributing to a bearish outlook for the CAD, providing a tailwind for the USD/CAD pair.

US Dollar Maintains Weekly Gains

Conversely, the US Dollar (USD) is maintaining its weekly recovery momentum following the Federal Reserve’s (Fed) hawkish pause announced on Wednesday and a modest rebound in US Treasury bond yields. These developments support the USD/CAD pair by bolstering the USD. However, uncertainty surrounding the Trump administration’s economic policies remains a limiting factor for the USD. Additionally, a further rise in oil prices supports the commodity-linked Canadian Loonie, thereby restricting the potential upside for the USD/CAD pair.

Market Sentiment Ahead of Key Economic Data

Traders are exercising caution ahead of the release of the monthly Canadian GDP figures and the US Personal Consumption Expenditure (PCE) Price Index, which is the Fed’s preferred measure of inflation. The US PCE Price Index will be pivotal in shaping USD demand, alongside oil price movements, potentially providing additional support for the USD/CAD pair during the US trading session. Despite these dynamics, the fundamental outlook indicates that the USD/CAD spot prices are likely to trend upwards.

Conclusion

In summary, the USD/CAD pair remains supported below the 1.4500 level, with key economic indicators such as the US PCE Price Index expected to drive future movements. The BoC’s dovish stance and potential US trade tariffs weigh on the CAD, while the USD benefits from the Fed’s policies and rising Treasury yields. Traders should watch for upcoming economic data releases, which will play a crucial role in determining the pair’s trajectory. Overall, the USD/CAD is positioned for an upward trend based on the current fundamental landscape.