USD/CAD extends downside under 1.3700 ahead of US PMI data

• USD/CAD trades in negative territory for the sixth consecutive day near 1.3690 in Friday’s early Asian session. 
• Fed’s Birkin said central bank is well-positioned with necessary firepower for job but needs to maintain data-dependent approach.
• Higher crude oil prices due to renewed hopes of a summertime upswing in fuel demand support the Loonie. 

The USD/CAD pair remains under some selling pressure around 1.3690 during the early Asian session on Friday. The pair edges lower despite the rise of the USD Index (DXY) to four-day highs near 105.70. The rally of crude oil prices continues to underpin the commodity-linked Loonie. On Friday, the advanced US S&P Global Manufacturing and Services PMI will be in the stoplight. 

The US Federal Reserve’s (Fed) policymakers pushed out the timing of the first interest rate cut this year. Fed Bank of Richmond President Tom Barkin said on Thursday that the central bank is well-positioned with the necessary firepower for the job, but will learn a lot more over the next several months. Meanwhile, Fed Bank of Minneapolis President Neel Kashkari noted that it will probably take a year or two to get inflation back to 2%, per Reuters. 

The financial markets have priced in around 10% odds of a rate cut in July, rising to nearly 70% in September and fully priced in for November, according to the CME FedWatch Tool. Even though the recent US Retail Sales last week prompted the expectation of two rate cuts from the Fed this year, a strict data-dependent approach from Fed officials might cap the downside for the Greenback against its rivals. 

On the Loonie front, crude oil markets extend the rally on renewed hopes of a summertime upswing in fuel demand. It’s worth noting that higher oil prices could underpin the Canadian Dollar (CAD) as Canada is the major crude oil exporter to the United States.

Furthermore, the Bank of Canada (BoC) cut its policy rate to 4.75% from 5% on June 5, the first cut in four years. The BoC Summary of Deliberations on Wednesday noted the risks of cutting too soon against the dangers of waiting too long. The BoC Governor Tiff Macklem said that it’s “reasonable” to expect further rate cuts, but that the decline in interest rates will likely be gradual.