USD/CAD falls toward 1.3600 due to higher Oil prices

• USD/CAD edges lower as the commodity-linked CAD finds support from higher Oil prices.
• WTI price appreciates as cooling US inflation data has raised speculation of a Fed rate cut in September.
• Chicago Fed President Austan Goolsbee stated that the US economy appears to be on track to achieve 2% inflation.

USD/CAD retraces its gains from the previous session, trading around 1.3620 during the European hours on Friday. The commodity-linked Canadian Dollar (CAD) finds support from the higher crude Oil prices, given the fact Canada is the biggest Oil exporter to the United States (US).

West Texas Intermediate (WTI) Oil price extends its winning streak for the third session, trading around $82.20 per barrel at the time of writing. Crude Oil prices received support as softer-than-expected US Consumer Price Index (CPI) data for June has raised speculation of a potential Federal Reserve (Fed) rate cut in September. Lower borrowing costs support the US economy, the largest Oil consumer in the world, which in turn boosts crude Oil demand.

In June, the US Consumer Price Index (CPI) decreased by 0.1% month-over-month, reaching its lowest level in over three years. The core CPI, which excludes volatile food and energy prices, rose by 3.3% year-over-year, compared to May's increase of 3.4%, matching expectations. Meanwhile, the core CPI increased by 0.1% MoM, below the expected and prior rise of 0.2%.

On policy front, Federal Reserve Bank of Chicago President Austan Goolsbee said on Thursday that the US economy appears to be on track to achieve 2% inflation. This suggests Goolsbee is gaining confidence that the time for cutting interest rates may soon be approaching. He also stated "My view is, this is what the path to 2% looks like," according to Reuters.

In Canada, the Unemployment Rate increased to 6.4% in June, the highest since January 2022, with the economy losing 1,400 jobs. This has heightened the likelihood of the Bank of Canada (BoC) implementing further interest rate cuts to boost economic growth. Consequently, the yield on Canadian 10-year government bond dropped to about 3.4%, reflecting dovish expectations from the BoC.

Traders await the Michigan Consumer Sentiment Index and US Producer Price Index (PPI) data, due on Friday, to gain further impetus on the US economy. On Loonie’s front, May’s Building Permits (MoM) will be eyed.