Ella 
In early Asian trading on Friday, the USD/CAD currency pair was in negative territory for the second consecutive trading day. The core PCE price index for December, the Fed’s preferred inflation gauge, will be a closely watched event on Friday. As of press time, USD/CAD was trading at 1.3472, down 0.01% on the day.
The U.S. economy grew stronger than expected in the final three months of 2023, the Commerce Department reported on Thursday. The annual gross domestic product (GDP) rate in the fourth quarter of 2023 was 3.3%, compared with the previous value of 4.9%. Following the release of the above upbeat data, U.S. bond yields will react lower. Markets continue to price in the possibility that the Federal Reserve will initiate its first rate cut in May. The CME FedWatch tool puts the chance of a rate cut in March at 47.4%.
In addition, U.S. Department of Labor data showed that the number of initial claims for unemployment benefits in the United States increased to 214,000 in the week ended January 20 from 189,000 last week, which was weaker than market expectations of 200,000. Continuing claims for unemployment benefits rose to 1.833 million from 1.806 million last week.
In Canadian dollars, the Bank of Canada (BOC) kept its key overnight interest rate at 5.0% on Wednesday, keeping the benchmark rate unchanged for the fourth consecutive time. Although the focus of the Bank of Canada’s message may shift from “the extent to which interest rates are maintained” to “the period for which interest rates are maintained,” the Bank of Canada has not indicated that it will cut interest rates soon as it remains concerned about inflation.
Meanwhile, higher oil prices due to geopolitical tensions in the Middle East and shipping disruptions in the Red Sea could boost the commodity-linked Canadian dollar (CAD).
Market participants will be closely watching the release of the core personal consumption expenditures price index (Core PCE) for December on Friday. In addition, Pending Home Sales data will be released. These data may provide direction for the USD/CAD pair.
