USD/CAD advances firmly above the 50-DMA, eyeing 1.2900
|- USD/CAD erases some of Monday’s losses and gains some 0.24%.
- A dampened market mood keeps safe-haven currencies like the greenback in the driver’s seat.
- Investors brace for US Consumer Price Index for July, with headline inflation estimated to fall.
The USD/CAD slightly advances from around Monday’s lows amidst a downbeat market sentiment due to traders preparing for July’s US inflation report. Also, geopolitical jitters, spurred by US House Speaker Pelosi’s trip to Taiwan, caused an aggressive reaction from China, extending its military drills beyond the due date.
The USD/CAD is trading at 1.2884 above its opening price after hitting a daily low at 1.2843 early in the North American session.
USD/CAD climbs on dismal sentiment
USD/CAD Tuesday’s price action is driven by investors preparing for US CPI. Last Friday’s US jobs report poured cold water on recession fears after creating 528K new jobs in the economy, consequently driving down the unemployment rate to 3.5%.
Meanwhile, investors quickly reacted to the US Department of Labor data, with money market futures odds of a 75 bps rate hike by the Fed sitting at 88%. Nevertheless, odds could be diminished if inflation numbers come lower than estimated, could influence the Fed to tighten at a slower rate.
In the meantime, according to analysts, a dismal Canada job report, slashing 30.6K jobs from the economy, is not seen as a factor to deter the Bank of Canada from hiking rates. Given that the BoC surprised markets by raising rates by 100 bps last month, analysts at Scotiabank commented that although July’s employment report disappointed, the BoC would continue tightening policy.
What to watch
An absent Canadian economic docket will leave USD/CAD traders adrift to US dollar dynamics. Meanwhile, the US docket will reveal July’s US Consumer Price Index, alongside a tranche of Fed speakers, led by Chicago’s Fed President Charles Evans and Minneapolis Fed Neil Kashkari, after the US inflation report.
USD/CAD Key Technical Levels
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