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The USD/CAD pair trades with mild losses near 1.3685 during the early European session on Friday. The US Dollar (USD) softens against the Canadian Dollar (CAD) amid weaker-than-expected US economic data and a rise in crude oil prices. The preliminary reading of the Michigan Consumer Sentiment Index report for February will be in the spotlight later on Friday. 

Data released on Thursday showed that the number of Americans filing new applications for unemployment benefits rose more than expected last week. Meanwhile, US job openings unexpectedly fell in December to the lowest level since 2020, and layoffs rose. Companies revealed the most job cutbacks in January since the Great Recession in 2009. Signs of weakening in the US labor market could drag the Greenback lower against the CAD. 

Meanwhile, ongoing geopolitical risks could boost crude oil prices and provide some support to the commodity-linked Loonie. It is worth noting that Canada is a major oil-exporting country, and high crude oil prices generally have a positive impact on the CAD. 

However, the downside for the pair might be limited amid hawkish shifts in Federal Reserve (Fed) leadership expectations. US President Donald Trump nominated former Fed governor Kevin Warsh as Fed chair last week. Traders anticipate a slower pace of interest rate cuts under his tenure and a focus on shrinking the Fed's balance sheet.

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