|

USD/CAD jumps to near 1.3600 on soft Canadian CPI, upbeat US Retail Sales

  • USD/CAD rises to near 1.3600 as soft Canadian CPI boosts BoC rate cut prospects.
  • The US Retail Sales surprisingly rose by 0.1% in August, while investors expected it to have contracted.
  • Investors expect the Fed to pivot to policy normalization from Wednesday’s meeting.

The USD/CAD pair climbs above the round-level resistance of 1.3600 in Tuesday’s North American session. The Loonie asset strengthens after the release of the soft Canadian Consumer Price Index (CPI) and upbeat United States (US) Retail Sales data for August.

The Canadian CPI report showed that the headline inflation returns to the bank’s target of 2%, grew slower than the estimates of 2.1% and the former release of 2.5%. Monthly headline CPI deflated by 0.2%, while economists expected it to rise by 0.1%, slower than 0.4% in July. The Bank of Canada’s (BoC) core CPI measure decelerated further to 1.5% from 1.7% in July. Soft inflation data would prompt market expectations for the BoC reducing interest rates further. The BoC has already cut its key borrowing rates by 75 basis points (bps) to 4.25%.

Meanwhile, the US Retail Sales rose by 0.1%, which was expected to have declined by 0.2%. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, recovers intraday losses and edges higher to near 100.80.

However, the near-term outlook of the US Dollar remains uncertain ahead of the Federal Reserve’s (Fed) monetary policy meeting on Wednesday. The Fed is widely anticipated to deliver its first-ever interest rate cut in more than four years as the central bank is concerned over slowing labor market conditions. However, traders remain divided over the likely Fed interest rate cut size.

According to the CME FedWatch tool, the probability of the Fed reducing interest rates by 50 bps to 4.75%-5.00% in September has increased sharply to 67% from 34% a week ago.

Investors will also focus on the Fed’s dot plot and economic projections. The Fed dot plot indicates the collective forecast Federal fund rate by all policymakers in the medium and long-term.

Author

Sagar Dua

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

More from Sagar Dua
Share:

Editor's Picks

AUD/USD seems vulnerable near 0.6800, 10-month low amid bullish USD

AUD/USD languishes near a 10-month low during the Asian session on Friday, awaiting a break below 0.6800 before the next leg up amid a bullish US Dollar. Firming Fed rate-hike expectations, along with fading hopes for US-Iran diplomacy, help the USD hold gains at its highest level since April 2025. Moreover, the RBA’s dovish tilt undermines the Aussie and backs the case for further losses.

USD/JPY bulls turn cautious near 160.00 amid intervention risks

USD/JPY enters a bullish consolidation phase around its highest level since early September as bulls turn cautious amid intervention risk near 160.00. Meanwhile, the downside seems cushioned as the wide US-Japan interest rate gap keeps the Yen carry trade active. Furthermore, the possibility of a jumbo Fed rate hike and Middle East uncertainties hold the US Dollar near a 19-month top, supporting the currency pair.



Gold remains on the back foot below $3,900

Gold now alternates gains with losses below the $3,900 mark per troy ounce on Friday. The precious metal struggles to regain traction amid the firmer US Dollar, mixed US Treasury yields and expectations of further tightening by the Fed at its December meeting.

Bitcoin just posted five straight losing weeks, and the storm may not be over yet

Bitcoin is struggling to find support, slipping below $70,000 as multiple headwinds threaten to push the Crypto King lower. The much-anticipated “Uptober” rally failed to materialize, with persistent selling pressure and widespread liquidations instead reinforcing the “Rektober” narrative.

Week ahead – Fed Minutes, inflation data and Nvidia earnings to guide investors

Fed minutes may add to hawkish tone as bets of 50-bps hike grow. Nvidia to report earnings as bar to impress high after spy scandal. Trade and geopolitics to be focal point of Trump-Xi summit.

Gold hit its lowest level of 2026 near $3,850
Gold (XAU/USD) attempts to stabilize around $3,890 on Friday after falling to $3,852 on Thursday, its lowest level since October 2025. The precious metal has lost more than 4% this week, as investors increasingly anticipate further monetary tightening from the Federal Reserve (Fed). The latest decline reflects a sharp change in market expectations.
USD/CAD jumps to near 1.3600 on soft Canadian CPI, upbeat US Retail Sales