USD/CAD holds to near 1.2820 as investors await US Core PCE

The USD/CAD pair is trading lackluster in the early Asian session amid uncertainty over the release of the US core Personal Consumption Expenditures (PCE) on Thursday. As per the market forecasts, a reading of 5.4% is seen against the prior print of 5%. This may raise the odds of an extremely aggressive tone from the Federal Reserve (Fed) chair Jerome Powell in May.

The asset has been scaling higher from the last week as expectations of an interest rate hike by the Fed have bolstered. After the statement from Fed chair Jerome Powell at the International Monetary Fund (IMF) meeting that a rate hike of 50 basis points (bps) by the Fed in May is on the cards, an announcement of the same has remained a formality now. Therefore, investors are more focused on the further guidance to be dictated by the Fed in May’s monetary policy. Considering the ramping up inflation and consistency in the maintenance of full employment, investors should brace for a tight liquidity environment for the rest of the year.

Meanwhile, loonie bulls are less effective amid steady oil prices. The supply worries from Russia vs. reduction in global growth forecasts and a pandemic fear in China is restricting the black gold from any major movement in these trading sessions.

Apart from the US Core PCE, investors will also focus on the US Gross Domestic Product (GDP) numbers, which are also due on Thursday. A preliminary estimate for the annualized GDP at 1.1% indicates underperformance against the prior print of 6.9%.