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The Canadian dollar CADUSD edged lower against its U.S. counterpart on Friday as oil prices fell, but the currency still notched its biggest weekly gain this year as signs of U.S. inflation peaking eased worries of aggressive tightening by the Federal Reserve.

The loonie was trading 0.1% lower at 1.2775 to the greenback, or 78.28 U.S. cents, easing back from a two-month high on Thursday at 1.2725.

For the week, it strengthened 1.2%. That was its biggest weekly advance since December 2021 but not as large as for some other commodity-linked currencies, such as the Australian and New Zealand dollars.

“The market has less angst,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.

“With (U.S.) CPI now like other inflation numbers suggesting that the top is in and that inflation will trend lower, the chances that the Fed is going to have to force a recession are lower.”

Wall Street’s main indexes added to this week’s gains after data on Wednesday showed U.S. consumer prices rising at a slower annual pace in July.

Investors have worried that central banks around the world will be unable to cool price pressures without triggering downturns.

The price of oil, one of Canada’s major exports, has also rallied this week but gave back some of those gains on Friday. U.S. crude prices fell 1.8% to $92.62 a barrel.

Canada’s inflation report for July is due on Tuesday, which could offer clues on the Bank of Canada policy outlook. Money markets expect the central bank to raise rates by an additional half a percentage point in September.

Canadian government bond yields were lower across a flatter curve. The 10-year eased 3 basis points to 2.757%.

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