USD/CAD on track to finish the week at multi-month lows below 1.31

• Crude oil rally helps the loonie gain traction.  
• US Dollar Index stays below 96 despite upbeat data.
• Canadian manufacturing sector loses momentum in January.

For the third straight day on Friday, the USD/CAD pair recorded losses and is looking to close the week at its lowest level since early November.  As of writing, the pair was down 0.4% on the day at 1.3086.

With the greenback struggling to make a decisive move following a mixed batch of macroeconomic data releases, crude oil prices stayed as the primary driver of the pair’s price action. After OPEC announced that the oil output in January fell to its lowest level in two years and the Baker Huges announced that the total number of active oil rigs in the U.S. declined by 15 this week, the barrel of West Texas Intermediate rose to its highest level since November 21 at $55.60 and helped the commodity-sensitive loonie outperform its rivals.

• US:  Total nonfarm payroll employment  increased by 304K in January vs 165K expected.

Earlier in the day, the January employment report from the U.S. showed that despite the government shutdown, nonfarm payrolls in January increased by an impressive 304K. However, the unemployment rate rose 4% in the same period and the average hourly earnings only rose by 0.1% to miss the market expectation of 0.3% to offset the greenback’s any potential gains. Since the sharp drop witnessed on Wednesday, the US Dollar Index’s recovery attempts remained relatively week and the US Dollar Index is on its way to posting its second weekly drop in a row.

Other data revealed that the business activity in the manufacturing sector in the U.S. expanded at a more robust pace than expected in January while the Canadian manufacturing sector continued to lose momentum.  

• US:  Markit Manufacturing PMI  comes in at 54.9 in January vs 54.5 expected.
• US:  ISM Manufacturing PMI  improves to 56.6 in January vs 54.2 expected.
• Canada: Markit Manufacturing PMI drops to 53 in January from 53.6 in December.

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