The USD/CAD pair continues to rise, marking its fourth consecutive day of gains, with the exchange rate hovering around 1.3710 during the European session on Friday. Investors are eagerly awaiting the release of the Core PCE Price Index inflation data, which is expected to show a decrease in year-over-year figures to 2.6% from the previous 2.8%. This inflation data is closely monitored by the Federal Reserve as their preferred gauge of inflation.
One of the main factors supporting the US Dollar and boosting the USD/CAD pair is the increase in yields on US Treasury bonds. This rise in yields can be attributed to the emergence of risk aversion following the expansion of the US economy as shown on Thursday. Although Gross Domestic Product Annualized expanded by 1.4% in the first quarter, slightly higher than the previous reading of 1.3%, it still indicates the lowest growth since the contractions in the first half of 2022.
The US Dollar Index (DXY), which measures the value of the US Dollar against six other major currencies, remains above 106.00 with 2-year and 10-year US yields standing at 4.72% and 4.29%, respectively, at the time of writing. Federal Reserve Board of Governors member Michelle Bowman reiterated on Thursday that she is not in favor of a central bank rate cut as inflation pressures are still high, mentioning that it is not yet appropriate to lower the policy rate due to potential upside risks to inflation.
On the other hand, Canada is set to release its GDP (MoM) data later in the North American session. The Canadian economy is expected to grow by 0.3% in April, following neutral growth seen in March. The Canadian Dollar (CAD) is supported by higher crude oil prices, as Canada is the largest oil exporter to the US. West Texas Intermediate (WTI) crude oil price continues to climb, trading near $81.90 during the European session on Friday, with prices set to advance for the third consecutive week due to supply threats related to the escalating conflict in the Middle East.
The Gross Domestic Product (GDP) is a key economic indicator released by Statistics Canada on a monthly and quarterly basis. It measures the total value of all goods and services produced in Canada during a specific period and is considered the main gauge of Canadian economic activity. The MoM reading provides insights into changes in economic activity compared to the previous month, with a high reading seen as bullish for the Canadian Dollar (CAD) and a low reading seen as bearish. The next release of GDP data is scheduled for June 28, 2024, with a consensus forecast of 0.3% growth for the month of April.
