The USD/CAD pair extends its rally for a fifth straight session, trading near the 1.3860 area during Thursday’s Asian session. The pair remains supported as the commodity-linked Canadian Dollar comes under pressure amid renewed concerns over global oil supply dynamics and their potential impact on Canadian crude demand.
The latest move follows comments from US President Donald Trump indicating efforts to re-establish Venezuelan crude imports. The prospect of increased oil supply and heightened competition has raised concerns over demand for Canadian oil exports, weighing on the Loonie and supporting USD/CAD upside.
Oil market developments pressure the Canadian dollar
Despite market concerns, Canadian Prime Minister Mark Carney sought to reassure investors, stating that Canadian crude remains competitive and low risk even if Venezuelan exports rise. His office also confirmed that Carney will visit China between January 13 and 17, as part of broader efforts to diversify Canada’s export destinations away from the United States amid ongoing uncertainty surrounding US trade policy.
These developments highlight Canada’s sensitivity to shifts in global energy markets, reinforcing the Canadian Dollar’s vulnerability when oil-related headlines turn less supportive.
Canadian data offers limited relief
On the domestic front, economic data offered some offsetting support. Canada’s seasonally adjusted Ivey Purchasing Managers’ Index rose to 51.9 in December from 48.4 in November, comfortably beating market expectations and signaling a return to expansion after a brief contraction.
Investors are now looking ahead to Canada’s Trade Balance data for October, due later on Thursday, for further insight into the external sector and its potential influence on the CAD.
US dollar steady ahead of key jobs data
The US Dollar remains broadly steady as traders remain cautious ahead of Friday’s highly anticipated US Nonfarm Payrolls report. The December jobs data is expected to show job gains of around 55,000, slightly lower than November’s 64,000 increase, keeping uncertainty over the labor market outlook in focus.
Recent US data has painted a mixed picture. The ISM Services PMI rose to 54.4 in December from 52.6 previously, beating expectations and signaling resilience in the services sector. However, labor market indicators were less convincing, with ADP data showing private-sector employment increased by 41,000 in December, below consensus forecasts.
With oil market dynamics pressuring the Canadian Dollar and the US Dollar holding firm ahead of key labor data, USD/CAD remains biased to the upside in the near term, with traders closely monitoring upcoming economic releases on both sides of the border.
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