Why Is USDCAD Climbing Toward 1.3540? Key Factors Driving the Rally

The musk coin price predictionUSDCAD currency pair has demonstrated consistent upward momentum throughout Friday's trading session, marking its second consecutive day of gains. This bullish movement follows Wednesday's unexpectedly high US Consumer Price Index figures, which significantly diminished market expectations for imminent Federal Reserve rate cuts. Thursday's Producer Price Index release further reinforced this monetary policy outlook, with the pair currently hovering near the 1.3540 resistance level.Market analysts attribute the Greenback's strength to shifting expectations regarding the Fed's interest rate trajectory. Persistent inflationary pressures revealed in recent economic reports have prompted speculation that the central bank may maintain elevated rates longer than previously anticipated. This hawkish sentiment has translated into rising Treasury yields, with the 2-year and 10-year notes currently trading at 4.68% and 4.28% respectively, providing fundamental support for the US Dollar Index (DXY) near 103.40.February's economic data revealed several critical developments. The Core Producer Price Index maintained a steady 2.0% annual growth rate, outperforming consensus estimates of 1.9%. The headline PPI figure showed even more substantial growth at 1.6% year-over-year, significantly surpassing both expectations (1.1%) and the previous month's reading (1.0%). Retail sales figures presented a more mixed picture, with the monthly figure rising 0.6% versus 0.8% forecasts, while the control group stabilized at 0.0% after prior declines.Commodity markets present a counterbalancing factor for the Canadian Dollar, as West Texas Intermediate crude prices extend their rally into a third consecutive session. This upward movement stems from robust US demand indicators and optimistic global consumption projections for 2024. Given Canada's position as the primary oil exporter to its southern neighbor, these developments could potentially limit USDCAD's upside potential by strengthening the commodity-linked Loonie.Canadian economic indicators showed modest improvement in manufacturing sales, which rebounded to 0.2% growth in January after December's downwardly revised -1.1% contraction. Market participants now await Friday's housing starts and wholesale sales data for further directional cues. The immediate focus, however, remains on the upcoming Michigan Consumer Sentiment Index release, which could provide critical insights into US economic expectations and influence near-term currency valuations