USD/CAD gains traction around 1.3460 ahead of US Retail Sales, Canadian CPI

The USD/CAD pair edges higher to 1.3460 in the early Asian session on Tuesday. The main driver of the USD’s strength is a rise in US yields as the 10-year yield climbs above 4.20%. Meanwhile, the easing in oil price undermines the Loonie against the US Dollar. The key events on Tuesday might trigger volatility across the market.

Market participants anticipate that the Federal Reserve (Fed) will keep the interest rate unchanged in its September meeting as US inflation remains moderate and in line with the central bank's target of 2%. However, the odds for an additional rate hike of 25 basis points (bps) increased to almost 40% in its November meeting. Last week, UoM 5-year Consumer Inflation Expectations declined to 2.9% for August versus 3.0% estimated and prior. While, UoM Consumer Confidence Index for July fell to 71.2 from 71.6, better than expected, and the US Producer Price Index (PPI) for final demand YoY rose 0.8% in July from 0.1% in June,

On the Canadian Dollar front, a decline in oil prices undermines the Canadian Dollar since Canada is the largest oil exporter to the United States. Last week, Canadian Building Permits came in at 6.1% MoM in July, better than market expectations of a 3.5% drop. Additionally, Canada’s trade deficit widened to C$3.73 billion in June, the highest level in nearly three years. Exports fell 2.2%, and Imports fell 0.5%. Market players await the annual Canadian Consumer Price Index for July. The upbeat data might cap the downside of Loonie and act as a headwind for the USD/CAD pair.

Looking ahead, market participants will keep an eye on the Canadian Consumer Price Index (CPI) YoY for July on Tuesday. The annual CPI is expected to rise from 2.8% to 3.0%, while the monthly CPI is seen at 0.3% versus 0.1% prior. Across the pond, the US Retail Sales and FOMC minutes will be due on Tuesday and Thursday, respectively. Investors will also take cues from the Fed officials’s comments for the Jackson Hole Symposium. The data will be critical for determining a clear movement for the USD/CAD pair.