USD/CAD inches higher to near 1.3460 on subdued Crude prices

• USD/CAD rebounds on the back of lower Crude oil prices.
• BoC Governing Council emphasized that US consumer spending could persist stronger than anticipated.
• The US Dollar receives upward support as the market adopts caution amid escalated tension in the Middle East.

USD/CAD halts its four-day losing streak as the US Dollar (USD) improves on market caution amid an escalated geopolitical tension in the Middle East. Additionally, the decline in Crude oil prices is contributing to downward pressure on the Canadian Dollar, consequently, underpinning the USD/CAD pair with trading around 1.3460 during the Asian session on Friday. Moreover, West Texas Intermediate (WTI) oil price tries to snap its four-day winning streak, edging lower to near $76.20 per barrel.

The Bank of Canada (BoC) released the Summary of Deliberations from its Governing Council on Thursday, outlining discussions leading to the monetary policy decision on January 24, 2024. Council members noted the surprising resilience of consumer spending in the United States. However, they anticipate a slowdown in spending in the coming quarters as consumers adapt to higher interest rates, having already utilized a significant portion of their pandemic-related savings. Despite this outlook, there is acknowledgment among members of the risk that US consumer spending could persist stronger than anticipated.

The US Dollar Index (DXY) aims to extend its recent uptrend for the second consecutive day, hovering near 104.20 at the time of writing. However, the decline in US bond yields may be exerting downward pressure on the Greenback. Nonetheless, the Dollar's resilience is mainly attributed to hawkish comments from US Federal Reserve (Fed) officials, which are continuing to support the currency.

Additionally, positive data from the US job market is likely contributing to the strengthening of the Greenback. US Initial Jobless Claims fell to 218K in the week ending February 2, down from the previous week's 227K and surpassing the estimated figure of 220K. Continuing Jobless Claims also decreased to 1.871M for the week ending January 26, beating market forecasts of 1.878M from the previous reading of 1.894M.

With no significant data releases scheduled from the United States, market participants are eagerly anticipating Canada's Unemployment Rate and Net Change in Employment figures, set to be released on Friday.