USD/CAD posts modest losses below 1.3650 ahead of US PCE, Canadian GDP releases

• USD/CAD trades in negative territory around 1.3640 in Friday's early Asian session.
• US President Trump attacked and threatened Fed credibility, undermining the US Dollar.
• Traders brace for the US May PCE inflation and Canadian April GDP data, which are due later on Friday.

The USD/CAD pair trades with mild losses near 1.3640 during the early Asian session on Friday. The US Dollar (USD) weakens against the Canadian Dollar (CAD) amid growing market concerns about the Federal Reserve's (Fed) independence. The US May Personal Consumption Expenditures (PCE) - Price Index and Canadian April Gross Domestic Product (GDP) data will be the highlights later on Friday.

According to a Wall Street Journal, US President Donald Trump is considering replacing Fed Chair Jerome Powell before his term ends in May. Trump has been encouraging the Fed Chair to lower interest rates faster. "Such an appointment by Trump of a shadow Fed chair will likely shake investor confidence in the central bank's independence, which is helping to contribute to the dollar's weakness", said Wasif Latif, chief investment officer at Sarmaya Partners in New Jersey.

Fed Chair Jerome Powell said on Wednesday that the central bank would be careful in considering further rate cuts as it expects Trump's tariffs would cause prices to rise this summer. Fed officials still expect to reduce interest rates this year, but the timing remains uncertain as policymakers wait on coming trade deadlines and hope for more certainty about the scope of the tariffs.

Meanwhile, a fall in Crude Oil prices could drag the commodity-linked Loonie lower and cap the downside for the pair. It's worth noting that Canada is the largest oil exporter to the US, and lower crude oil prices tend to have a negative impact on the CAD value.