Canadian Dollar drops one-week low vs. bullish USD as focus shifts to jobs data, US PCE

The USD/CAD pair gains some follow-through positive traction for the third straight day and touches a fresh weekly top, above mid-1.3600s during the early European session on Friday. The momentum is sponsored by a combination of factors as the market focus shifts to important macro releases from the US and Canada.

The US Dollar (USD) buying remains unabated amid the growing acceptance that the Iran war-inspired surge in energy prices would rekindle inflationary pressure and force the Federal Reserve (Fed) to delay cutting interest rates. Hence, the immediate market reaction to the US Personal Consumption Expenditures (PCE) Price Index – the Fed's preferred inflation gauge – is likely to be short-lived.

Friday's US economic docket also features Durable Goods Orders, JOLTS Job Openings data, and the Preliminary Michigan Consumer Sentiment and Inflation Index, which could influence the USD price dynamics. Apart from this, the monthly Canadian employment details might contribute to producing short-term trading opportunities around the USD/CAD pair later during the North American session.

In the meantime, a modest pullback in Crude Oil prices seems to undermine the commodity-linked Loonie. The USD, on the other hand, climbs back closer to its highest level since late January, touched earlier this week amid reduced Fed rate cut bets, and turns out to be another factor acting as a tailwind for the USD/CAD pair. However, supply disruption fears could support Oil prices and cap spot prices.