USD/CAD price steadies above $1.415 ahead of U.S. PMI data
USD/CAD price chart showing key support and resistance levels, highlighting recent market trends
USD/CAD remains largely unchanged in early Friday trading, hovering around 1.4170 after declining in the previous session. The pair struggles as the U.S. dollar (USD) faces pressure from weak jobless claims data and mixed signals from the Federal Reserve (Fed).
Market participants are now focused on the US S&P Global Purchasing Managers Index (PMI) for February, which is set to be released later in the day.
U.S. labor market and Fed policy concerns
The latest US Initial Jobless Claims report showed a rise to 219,000 for the week ending February 14, exceeding expectations of 215,000. Meanwhile, Continuing Jobless Claims also increased to 1.869 million, marginally below the forecasted 1.87 million. The data suggests ongoing labor market softness, contributing to uncertainty regarding Fed policy.
Fed Governor Adriana Kugler commented that US inflation still has "some way to go" before reaching the 2% target, hinting at prolonged monetary tightening. Additionally, St. Louis Fed President Alberto Musalem raised concerns over stagflation risks, suggesting that inflation expectations could persist longer than anticipated.
The US dollar Index (DXY), which measures the greenback against six major currencies, trades near 106.50, struggling to gain traction as US President Donald Trump hinted at progress in trade talks with China, potentially reducing market concerns over tariffs. However, Trump simultaneously announced new import tariffs on lumber and forest products set to take effect next month, which could negatively impact the Canadian dollar (CAD), given Canada’s dominant role as a global lumber exporter.
BoC policy and Canadian economic outlook
The Bank of Canada (BoC) is facing renewed inflationary concerns after January’s Consumer Price Index (CPI) report signaled persistent price pressures. This has led to speculation that the BoC may delay interest rate cuts, adopting a more cautious approach.
Investors will closely monitor Canada’s Retail Sales report, due Friday, alongside BoC Governor Tiff Macklem’s speech, which could provide fresh insights into the central bank’s monetary policy stance. A stronger-than-expected retail sales reading could reinforce the CAD’s resilience, while weaker figures might push USD/CAD higher.
Market outlook
USD/CAD remains range-bound, with traders awaiting key economic data from both the US and Canada. A higher-than-expected US PMI reading could support the USD, while further signs of economic resilience in Canada might strengthen the CAD. The pair’s near-term direction will depend on central bank commentary and further developments in US-China trade negotiations.
In our last discussion, we highlighted USD/CAD’s resistance at 1.4236 and its struggle to gain momentum amid shifting Fed expectations. Those levels remain critical as the pair consolidates ahead of key data.
