USD/CAD edges lower to near 1.3380 as Crude prices rise, US, UK attacks on Houthis

USD/CAD retraces its recent gains registered in the previous session, edging lower to near 1.3380 during the Asian session on Friday. The Canadian Dollar (CAD) has strengthened in response to the increase in crude oil prices, which can be linked to the heightened tensions in the Middle East.

The military forces of the United States (US) and United Kingdom (UK), supported by Australia, Bahrain, Canada, and the Netherlands, conducted air strikes on Houthi targets in Yemen led by Iran. This action was taken in an effort to safeguard maritime vessels in the Red Sea. West Texas Intermediate (WTI) price trades near $73.40 per barrel at the time of writing.

In the absence of Economic data from Canada for the entire week, traders waiting for next week’s Canada Consumer Price Index data for December and Retail Sales figures for November on Tuesday and Friday, respectively.

The US Dollar (USD) faces challenges on improved risk appetite as traders move away from the Greenback, which could be attributed to the speculation of Federal Reserve’s (Fed) rate cuts in March and May. The US Dollar Index (DXY) trades slightly lower around 102.20 despite improved US Treasury yields.

On Thursday, the positive US inflation data provided support for the US Dollar, enabling it to gain some upward traction. The US Consumer Price Index (CPI) recorded a 3.4% year-on-year increase in December, surpassing both November's 3.1% and the expected market figure of 3.2%. Additionally, the monthly CPI growth for December exhibited a 0.3% increase, surpassing the market projection of 0.2%. However, the annual Core CPI slightly eased to 3.9% from the previous reading of 4.0%, while the monthly figure remained stable at 0.3%, aligning with expectations.

Traders await the release of the US Producer Price Index (PPI) data for December, along with the speech by Federal Reserve member Neel Kashkari later in the North American session, seeking additional insights into the economic landscape of the United States.