USD/CAD sticks to modest gains above 1.3900 ahead of US PCE data, Canadian GDP

• USD/CAD regains positive traction and remains close to a multi-month top set on Wednesday.
• A fresh leg down in Oil prices undermines the Loonie and offers some support to the major.
• A modest USD downtick might cap gains ahead of the US PCE Price Index and Canadian GDP.

The USD/CAD pair attracts fresh buying on Thursday and for now, seems to have stalled its corrective pullback from the 1.3940 area, or the highest level since August 5 touched the previous day. Spot prices trade above the 1.3900 mark through the first half of the European session as traders keenly await important macro data from the US and Canada. 

The US Personal Consumption Expenditure (PCE) Price Index should provide cues about the Federal Reserve's (Fed) interest rate outlook, which, in turn, will play a key role in influencing the US Dollar (USD) price dynamics. Apart from this, the monthly Canadian GDP print should provide some meaningful impetus to the USD/CAD pair. Heading into the key data risk, renewed selling around Crude Oil prices is seen undermining the commodity-linked Loonie and acting as a tailwind for the currency pair. 

The USD, on the other hand, languishes near the weekly low amid the hawkish Bank of Japan (BoJ)-inspired buying around the Japanese Yen (JPY). That said, elevated US Treasury bond yields, bolstered by firming expectations for a less aggressive policy easing by the Fed and deficit-spending concerns after the US election, continue to offer some support to the Greenback. Apart from this, the risk-off impulse benefits the USD's relative safe-haven status and contributes to the USD/CAD pair's move up. 

The incoming US economic data suggests that the economy remains on strong footing and supports prospects for smaller interest rate cuts by the Fed. Furthermore, investors remain concerned that the spending plans of Vice President Kamala Harris and the Republican nominee Donald Trump will further increase the US fiscal deficit. This, in turn, continues to push the US bond yields higher and favors the USD bulls, suggesting that the path of least resistance for the USD/CAD pair remains to the upside.