Ella 
USD/CAD is trading slightly higher near 1.3880 during early European trade on Monday. Falling crude oil prices have put some selling pressure on the commodity-linked Canadian dollar (CAD). However, safe funding flows may provide some support to the Canadian dollar and limit its upside. Monday’s U.S. ISM Services Purchasing Managers’ Index (PMI) will be in focus.
Risk sentiment stemming from escalating geopolitical tensions in the Middle East could boost safe-haven currencies, lifting the USD/CAD exchange rate. U.S. Secretary of State Tony Blinken told his Group of Seven (G7) counterparts on Sunday that Iranian and Hezbollah attacks on Israel could begin as early as Monday, three people familiar with the matter told Axios.
However, weak U.S. employment data on Friday may fuel expectations of an interest rate cut by the Federal Reserve (Fed) this year, which may weigh on the dollar. The U.S. Department of Labor announced on Friday that U.S. nonfarm payroll employment (NFP) increased by 114,000 in July, down from the revised 179,000 in June and below expectations of 185,000. Meanwhile, the U.S. unemployment rate climbed to 4.3% in July from 4.1% in June, the highest level since November 2021.
On the Canadian dollar front, speculation that the Bank of Canada (BOC) may cut interest rates again this year could weaken the currency. Markets are pricing in another 25 basis points of rate cuts this year, with the chance of another cut at the Bank of Canada’s September meeting close to 60 per cent. In addition, since Canada is a major oil exporter to the United States, falling crude oil prices may put some selling pressure on the Canadian dollar in the short term.
