USD/CAD rebounds from 1.3370 as investors turn anxious ahead of US PPI

• USD/CAD has picked strength after testing the critical support at 1.3370.
• The end of the four-day winning spell by the S&P500 portrays caution in the risk impulse.
• Lower-than-anticipated Canada’s December CPI report has delighted the BoC.

The USD/CAD pair has delivered a recovery move after gauging strength near the critical support of 1.3370 in the late New York session. The Loonie asset has sensed demand as investors are getting anxious ahead of the release of the United States Producer Price Index (PPI) data, which is scheduled for Wednesday.

Caution has been observed in the risk profile as S&P500 ended its four-day winning streak on Tuesday after a four-day winning spell. Mixed performance from companies amid the result season has impacted the 500-stock basket, portraying a decline in investors’ risk appetite. The US Dollar Index (DXY) delivered a V-shape recovery after dropping to near 101.60 and has now continued to trade lackluster around 102.00. The recovery in the USD Index was supported by strength in the US Treasury yields. The 10-year US Treasury yields scaled above 3.54%.

Investors are keenly focusing on the release of the US PPI numbers for fresh impetus. As per the consensus, the economic data is expected to decline further. The headline PPI (Dec) is seen lower at 6.8%, while the core PPI is seen falling to 5.9%. Producers might trim their losses inspired by lower prices by easing wage growth or lay-offs, which would further cut inflation projections.

On the Loonie front, the weak December Consumer Price Index (CPI) report has delighted the Bank of Canada (BoC). The annual headline CPI (Dec) remained in line with the expectations at 6.3% lower than the former release of 6.8%. While the core inflation that excludes oil and food prices dropped vigorously to 5.4%, the street was expecting an increase to 6.1% against the prior release of 5.8%.