Ella 
USD/CAD remained muted, leaning towards extending losses for a third straight session, hovering around 1.3480 during Friday’s Asian session. The USD/CAD pair lost ground as the US dollar (USD) remained subdued amid speculation that the Federal Reserve (Fed) may cut interest rates. In addition, the Canadian dollar (CAD) received upward support from Canada’s mixed retail sales data released on Thursday.
Statistics Canada reported a monthly increase in retail sales of 0.9% in December, beating estimates of 0.8%. The increase compared with the previous flat reading of 0.0% in November, indicating higher sales among retailers. However, retail sales excluding automobiles increased by 0.6% on a monthly basis, slightly below market expectations of 0.7%, but a significant rebound from the previous decline of 0.4%.
However, lower crude oil prices are likely to weigh on the Canadian dollar, limiting losses in the USD/CAD pair. At press time, West Texas Intermediate (WTI) oil prices were trading lower at around $78.10 a barrel. Crude oil demand faces challenges as global interest rates rise and economic activity is suppressed.
The U.S. dollar index (DXY) found upward support on Thursday amid strong U.S. labor data. The U.S. Bureau of Labor Statistics (BLS) reported that the number of initial jobless claims in the United States for the week ended February 16 was lower than consensus expectations, at 201,000, lower than the expected value of 218,000 and the previous value of 213,000.
In addition, initial readings of the S&P Global Purchasing Managers Index (PMI) were mixed, pointing to economic expansion, strengthening the Federal Reserve’s case for maintaining high interest rates for longer to combat inflationary pressures.
Specifically, the S&P Global U.S. Services Purchasing Managers’ Index recorded 51.3 in February, slightly lower than the expected value of 52.0 and the previous value of 52.5. The manufacturing PMI came in at 51.5, above expectations of 50.5 and the previous reading of 50.7. However, the U.S. Composite Purchasing Managers’ Index fell to 51.4 in February from the previous reading of 52.0.
