• The Canadian Dollar strengthens after Canada's June employment report beats expectations.
• USD/CAD heads for its first weekly loss in six weeks.
• Next week's US inflation data could shape expectations for the Fed's interest rate path.

The Canadian Dollar (CAD) strengthens against the US Dollar (USD) on Friday after stronger-than-expected Canadian employment data. At the time of writing, USD/CAD is trading around 1.4151, near its lowest level in more than two weeks.

Statistics Canada reported that the economy added 18.2K jobs in June, exceeding market expectations of 10K. However, the reading was sharply lower than the 87.8K increase recorded in May. The Unemployment Rate eased to 6.5% from 6.6%.

As labor market conditions remain uneven, the Bank of Canada (BoC) is likely to maintain a wait-and-see approach, with policymakers expected to leave interest rates unchanged in the coming months while monitoring inflation risks, particularly those stemming from higher energy prices.

Energy-driven inflation risks are back in focus after Oil prices rose earlier this week following renewed hostilities in the Middle East. Higher crude lifted the commodity-linked Canadian Dollar, putting USD/CAD on track for its first weekly loss in six weeks.

However, Oil prices are paring earlier gains as diplomatic efforts to de-escalate tensions in the Middle East continue. Reuters reported that Qatari mediators are in Iran for talks aimed at creating conditions for broader negotiations.

Meanwhile, the US Dollar remains firm as traders reassess developments in the Middle East, while expectations of a Federal Reserve (Fed) interest rate hike later this year continue to underpin the Greenback, limiting further downside in USD/CAD.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading around 100.90 after rebounding from an intraday low of 100.60.

Traders now await next week's US Consumer Price Index (CPI) data, due on Tuesday, for fresh clues on the Fed's monetary policy path.