- USD/CAD erases part of Monday’s losses and gains 0.24%.
- Market sentiment is affected and safe haven currencies such as the dollar remain in the driver’s seat.
- Investors brace for July’s US Consumer Price Index.
The USD/CAD up slightly from Monday’s lows amid bearish market sentiment as traders brace for July’s US inflation report. Furthermore, geopolitical jitters, fueled by US House Speaker Pelosi’s trip to Taiwan, prompted an aggressive reaction from China, extending its military exercises beyond the planned date.
USD/CAD is trading at 1.2884 above its opening price, after hitting a daily low of 1.2843 earlier in the American session.
USD/CAD rises on negative sentiment
Tuesday’s USD/CAD price action is driven by investors bracing for the US CPI. Last Friday’s US jobs report poured cold water on recession fears after 528,000 new jobs were added to the economy, pushing the unemployment rate down to 3.5%.
Investors, meanwhile, reacted quickly to data from the US Department of Labor, with the odds in money market futures of a 75 basis point interest rate hike by the Fed standing at 88. %. However, the odds could diminish if inflation numbers come in below estimates, which could influence the Fed to tighten monetary policy at a slower pace.
Meanwhile, according to analysts, Canada’s dismal employment report, with 30.6 thousand jobs cut, is not seen as a factor that would deter the Bank of Canada from raising rates. With the BOC surprising markets by raising rates by 100 basis points last month, analysts at Scotiabank commented that although the July jobs report disappointed, the BOC will continue to tighten policy.
What must be considered
A missing Canadian economic docket will leave USD/CAD traders adrift on US dollar dynamics. Meanwhile, the US docket will reveal the Consumer Price Index for July, along with a series of Fed speakers, led by Chicago Fed President Charles Evans and Minneapolis Fed President Neil Kashkari, after US inflation report
USD/CAD Key Technical Levels
Source: Fx Street
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