USD/CAD bears move in for the kill in firmer commodity complex

• USD/CAD bears take back control on sofer US dollar.
• US inflation weighing late in the week, bulls capitalise in divergence between Canada CPI.

USD/CAD has started the Asia day better offered following Wednesday's softer session in the greenback, inflation prints from around the globe and a slightly better risk tone in general. At the time of writing, USD/CAD is trading at 1.2625 and between a low of 1.2623 and a high of 1.2630 so far.

The commodity complex, on the whole, was higher and CAD, AUD, as well as NZD, were all closing the Wall Street session marginally better off. ''The move has coincided with a turn in equity sentiment and higher bond yields, and in that sense, it looks like a classic “risk-on” jump, albeit a very mild one,'' analysts at ANZ Bank said. 

Canada's annual inflation rate accelerated to 4.1% in August, its highest since March 2003, boosted in part by a big jump in gasoline prices. USD/CAD was down 0.52% at 1.2625 after trading in a range of 1.2624 to 1.2708 the high. Sterling rose 0.23% versus the dollar at $1.3834 by the close, but it was off the five-week high of 1.39.13 against the dollar touched on Tuesday. Elsewhere, WTI prices rose to $73.11/bbl as US inventories run low and storms disrupt US production.

For the day ahead, traders are looking to the commodity currencies for action. First up, we have New Zealand's Gross Domestic Product for the second quarter. ''We expect that this data will cap off what was an incredible run of positive data, in a June quarter where unemployment fell to 4% and annual CPI inflation reached 3.3% – above the RBNZ’s 1-3% target range,'' analysts at ANZ Bank said.

''We’ve pencilled in a 1.2% q/q lift in production GDP, which would see annual growth come in at 16.2% – but that’s mostly due to the very weak base from lockdown in 2020. We’re expecting that growth was also pretty broad-based across primary, goods, and services industries.''

Much later in the day, Aussie Employment data will be the focus. ''Employment likely fell in August but less than consensus. While job vacancies have declined, they remain at a very high level, hinting at resilience in labour demand,'' analysts at TD Securities said. 

''Moreover, we think fiscal support is likely to partly offset some job losses as the adjustment to the labour market occurs through reduced hours worked (as seen in July), and not job losses.''