Canadian Dollar Holds Near Three-Month High Against Soft US Dollar, Awaiting Data

USD/CAD extended its weakness during the European session on Friday, trading around 1.3752, slightly above the three-month low hit intraday. The pair has declined for a third consecutive session and is on track for a sharp fourth consecutive weekly loss, marking its sixth decline in the past seven weeks. Broad US dollar weakness is the primary factor driving the pair lower.

**US Dollar Weakness Stemming from Cooling Rate Hike Expectations**

Investors continue to trim bets on future Federal Reserve rate hikes, pushing the US dollar index to a three-month low. A reassessment of the US monetary policy outlook has weighed on the greenback against most major currencies. Against this backdrop, the Canadian dollar has steadily strengthened, with USD/CAD pulling back notably from earlier highs.

**Market Focus on Upcoming Economic Data**

The pair is finding temporary support in the region just above 1.3700 mid-levels, with market sentiment turning cautious as participants await new catalysts. Traders are closely monitoring upcoming Canadian and US economic data to gauge the future policy paths of both central banks. Any data showing resilience in the Canadian economy or further cooling in US inflation could provide additional support for the loonie and pressure USD/CAD toward lower levels.