USD/CAD soars amid resilient US Dollar and weak oil prices

The USD/CAD pair climbs swiftly to near 1.3475 in the European session amid sheer strength in the US Dollar and a sell-off in the oil prices. The Loonie asset delivers a perpendicular upside move amid the US Dollar’s resilience due to the cautious market mood ahead of the United States Consumer Price Index (CPI) data for July.

S&P500 futures post significant losses in London, portraying bearish market sentiment. US equities are expected to open on a bearish note as corporate earnings season reaches a peak. The US Dollar Index prints a fresh three-day high at 102.70 as investors expect stubbornness in the US inflation report for July.

As per the estimates, headline and core CPI maintained a pace of 0.2%. Annual headline CPI rebounded to 3.3% vs. June’s print of 3.0%. Contrary, core inflation that excludes volatile food and oil prices decelerated marginally to 4.7% against a prior reading of 4.8%. A recovery in the US headline inflation is expected due to higher oil prices in June.

Meanwhile, the Canadian Dollar witnesses selling pressure as the labor market remains weak in July. The hiring process slows down sharply as firms remain cautious due to the bleak economic outlook. Also, the Unemployment Rate increased to 5.5%. This would allow the Bank of Canada (BoC) to deliver an unchanged interest rate decision.

On the oil front, oil prices dropped sharply to near $80.00 as investors hope that the Federal Reserve (Fed) could continue tightening policy further amid a tight labor market and expectations of sticky inflationary pressures. It is worth noting that Canada is the leading exporter of oil to the United States and low oil prices impact the Canadian Dollar.