Canadian Dollar falls back against US Dollar ahead of US flash PMI data

USD/CAD recovers to near 1.4185 due to the US Dollar’s continued outperformance.
The Fed is highly anticipated to raise interest rates this year.
Higher inflation and economic concerns pose stagflation risks in the Canadian economy.

Sagar Dua FXStreet

The Canadian Dollar (CAD) retreats against the US Dollar (USD) on Tuesday after a short-lived pullback move the previous day. The USD/CAD pair rebounds to near 1.4185 as the US Dollar outperforms its peers due to firm expectations that the next monetary policy adjustment by the Federal Reserve (Fed) will be on the upside.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% higher to near 101.10, the highest level seen in over a year.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.05%	0.04%	-0.03%	0.11%	0.63%	0.40%	-0.04%
EUR	0.05%		0.07%	0.00%	0.14%	0.64%	0.43%	-0.01%
GBP	-0.04%	-0.07%		-0.04%	0.08%	0.59%	0.36%	-0.07%
JPY	0.03%	0.00%	0.04%		0.12%	0.64%	0.41%	-0.04%
CAD	-0.11%	-0.14%	-0.08%	-0.12%		0.52%	0.30%	-0.15%
AUD	-0.63%	-0.64%	-0.59%	-0.64%	-0.52%		-0.20%	-0.65%
NZD	-0.40%	-0.43%	-0.36%	-0.41%	-0.30%	0.20%		-0.46%
CHF	0.04%	0.00%	0.07%	0.04%	0.15%	0.65%	0.46%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

According to the CME FedWatch tool, the odds of the Fed hiking interest rates this year are almost 87%.

Hawkish Fed bets have escalated due to consistently accelerating core inflationary pressures and an improvement in labor demand.

Meanwhile, investors await the US preliminary S&P Global Purchasing Managers’ Index (PMI) data for June, which will be published at 13:45 GMT. The US Services PMI is expected to arrive at 51.0, higher than 50.7 in May. Meanwhile, the Manufacturing PMI will likely come in lower at 54.7 from the previous reading of 55.1.

In the Canadian region, accelerating inflationary pressures and growing economic concerns have prompted fears of a stagflation. On Monday, Statistics Canada reported that the headline inflation rose to 3.2% Year-on-Year (YoY), higher than 3% estimates and the previous reading of 2.8%.

In the policy announcement last week, Bank of Canada (BoC) Governor Tiff Macklem warned of downside economic risks in the monetary policy conference. “Economy is weak but clearly not in recession,” Macklem said.

Economic Indicator

Consumer Price Index (YoY)

The Consumer Price Index (CPI), released by Statistics Canada on a monthly basis, represents changes in prices for Canadian consumers by comparing the cost of a fixed basket of goods and services. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.

AUD/USD bounces back toward 0.6950 on fresh USD supply

AUD/USD bounces back toward 0.6950 in the Asian session on Friday. The US Dollar retreats from 17-month highs as traders take profits off the table ahead of the all-important US Nonfarm Payrolls report. Meanwhile, the Australian Dollar draws support from reviving expectations of a November interest rate hike amid elevated global yields and inflation risks.

USD/JPY struggles near 158.00 as USD retreats ahead of NFP

USD/JPY is struggling for fresh impetus near 158.00, moving away from the top end of its weekly range in the Asian session on Friday, after hotter-than-expected Tokyo CPI and amid a broad US Dollar retreat. Traders reposition themselves ahead of US Nonfarm Payrolls.

Gold remains capped below $4,200 as traders await US NFP for Fed rate cuts

Gold extends its sideways move on Friday, trading below the $4,200 mark heading into the European session as traders await the release of US employment details. The US Nonfarm Payrolls report is expected to show that the economy added only 90K jobs in September, down from the previous month's reading of 162K.

Pi Network retreats to key support level as selling pressure resurfaces

Pi Network price remains volatile in the near term, hovering around $0.0900 at press time on Friday after losing over 3% the previous day. The pullback warns of a steeper correction, with a risk of breaking below a rising wedge pattern on the four-hour chart. Pi Network struggles to maintain a steady recovery as the price remains capped below the $0.1000 psychological barrier.

US jobs report is due: We expect a hot one

In Japan, September Tokyo core CPI rose to 2.7% (cons: 2.4%). The figure was above the BOJ's 2% target for the first time since January. In commodities, Brent crude futures traded above USD 102/bbl on Friday morning after the WSJ reported that the Pentagon will be sending a third aircraft-carrier strike group and additional soldiers to the Middle East.

Markets are pricing a Fed pause. The jobs data says the hike is still coming

The market has rapidly changed its mind about the Federal Reserve (Fed). Only a week ago, investors saw an October interest-rate hike as the most likely outcome. However, softer inflation and cautious comments from policymakers have since turned a pause into the dominant scenario. Yet beneath that dramatic repricing, the US economy is sending a considerably less dovish message.