The US Dollar (USD) has strengthened significantly, reaching its highest level since late November, with the USD Index climbing above 100.00 and the USD/CAD pair touching a fresh weekly top above the mid-1.3600s during the early European session on Friday [1][2]. This marks the third consecutive day of gains for the USD/CAD pair, driven by persistent USD buying amid expectations that the Federal Reserve (Fed) will delay interest rate cuts due to renewed inflationary pressures stemming from the Iran war-inspired surge in energy prices [1][2][3]. The market's focus is now on key macroeconomic releases, including the US Personal Consumption Expenditures (PCE) Price Index, Durable Goods Orders, JOLTS Job Openings, and the Preliminary Michigan Consumer Sentiment and Inflation Index, all scheduled for later in the day [1][2][3].
For the Canadian Dollar (CAD), a modest pullback in crude oil prices has undermined the commodity-linked currency, while the USD's strength has further pressured the CAD. The upcoming Canadian employment data, specifically the Unemployment Rate, is also in focus, with consensus at 6.6% compared to the previous 6.5% [1]. The outcome of this release could provide short-term trading opportunities for the USD/CAD pair [1].
In the broader currency market, the USD has outperformed most major currencies this week, with a 0.66% gain against the EUR, 0.89% against the GBP, and 0.46% against the JPY, while it has declined by 0.69% against the CAD according to the weekly percentage change table [2]. However, this appears to contradict the narrative of USD strength versus CAD in the spot market, as the USD/CAD pair is reported to be at a weekly high [1]. According to [2], the USD has weakened against the CAD by 0.69% this week, but [1] reports the USD/CAD pair at a fresh weekly top, indicating a possible discrepancy in the timing or calculation of the data.
The British Pound (GBP) has come under pressure, with GBP/USD falling below 1.3300 for the fourth consecutive day, driven by disappointing UK macroeconomic data and broad USD strength [2][3]. The UK's GDP was flat in January (0% MoM), missing the consensus estimate of 0.2% and down from the previous 0.1% increase [3]. Industrial Production declined by 0.2% MoM, while Manufacturing Production rose by 0.1% [3]. These figures weighed on the GBP, pushing the GBP/USD pair to the lower boundary of its weekly range [3].
Geopolitical tensions in the Middle East, particularly the ongoing conflict and statements regarding the closure of the Strait of Hormuz, have contributed to rising crude oil prices and heightened inflation fears, further supporting the USD's safe-haven appeal [2][3]. US Treasury Secretary Scott Bessent stated that the US Navy will escort oil tankers through the Strait of Hormuz when militarily possible [2]. Market participants are closely watching upcoming US data releases and geopolitical developments for further direction in USD pairs [1][2][3].
CONCLUSION
The US Dollar has surged to multi-month highs against major currencies, supported by inflation concerns and geopolitical tensions, while the Canadian Dollar and British Pound have weakened amid commodity price fluctuations and disappointing UK data. Market attention is now on key US and Canadian economic releases, which could drive further volatility. The overall sentiment remains bullish for the USD, with high market impact expected.