The USD/CAD pair extended its sideways consolidative price action through the early European session and remained confined in a narrow trading band near the 1.2400 mark. The pair, so far, has struggled to register any meaningful recovery and remained well within the striking distance of one-month lows, around the 1.2385 region touched earlier this week. The Canadian dollar continued benefitting from last week's more hawkish BoC decision to reduce its weekly asset purchases. The Canadian central bank also brought forward the guidance for the first interest rate hike to the second half of 2022.
Apart from this, an uptick in crude oil prices further underpinned the commodity-linked loonie and acted as a headwind for the USD/CAD pair. That said, the downside remains cushioned amid a modest pickup in demand for the US dollar, which found some support from a strong rally in the US Treasury bond yields. Tuesday's upbeat US economic data pushed the yield on the benchmark 10-year US government bond back above the 1.60% threshold.