USD/CAD holds comfortably above 1.3900 mark amid notable USD strength

USD/CAD gains positive traction for the second successive day on Monday amid a bullish USD.

Subdued Oil prices undermine the Loonie and lend support amid bets for a jumbo BoC rate cut.

Traders await the US consumer inflation and Fed Chair Jerome Powell’s speech later this week.

The USD/CAD pair attracts buyers for the second successive day on Monday and sticks to its modest intraday gains, around the 1.3925 region through the first half of the European session. Spot prices draw support from a combination of factors and remain within the striking distance of the highest level since October 2022 retested last week.

Crude Oil prices struggle to gain any meaningful traction amid the disappointment over China's fiscal stimulus and softer-than-expected Chinese inflation figures, which tempered hopes for a fuel demand recovery in the world's top importer. Meanwhile, Friday's mixed Canadian employment figures do little to dent market expectations about a more aggressive easing by the Bank of Canada (BoC). This, in turn, is seen undermining the commodity-linked Loonie, which, along with a bullish US Dollar (USD) buying, pushes the USD/CAD pair higher at the start of a new week. 

The USD Index (DXY), which tracks the Greenback against a basket of currencies, climbs back closer to a four-month top touched last week amid the optimism over US President-elect Donald Trump's expansionary policies. Furthermore, Trump's pledge to impose a universal 10% tariff on imports from all countries is expected to boost inflation and restrict the Federal Reserve (Fed) to ease its monetary policy more aggressively. This remains supportive of elevated US Treasury bond yields, which, along with the cautious market mood, continues to benefit the safe-haven buck.