• USD/CAD will end the week with losses of 1.22%.
• August University of Michigan Consumer Sentiment surprises to the upside and boosts the greenback.
• US Fed officials remain committed to fighting inflation and reiterate that their job is not done.

The USD/CAD advances on Friday, erasing losses from Thursday, after a positive report on US consumer sentiment boosted investor appetite, propelling US stocks higher, while the dollar rose . At the time of writing, the USD/CAD is trading at 1.2773.

USD/CAD changes hands above its opening price, but early in the European session, it fell to the daily low at 1.2739, but the buyers moved in and lifted the pair above the 100 day EMA at 1.2795. . However, once the dust settled, the pair stabilized around current prices.

US data releases during the morning lifted USD/CAD above its 100-day EMA as the University of Michigan showed US Consumer Sentiment improved from 52.5 expected to 55.1, hitting a three-month high. This is good news for the Federal Reserve; however, inflation expectations for a 5-year horizon jumped above the 3% threshold, while in the short term, one year, they fell to 5% from the estimated 5.2%.

However, during the week, US inflation data pointed lower, led by the CPI, which came in at 8.5%, while the PPI slowed to 8.5%. However, Fed officials reiterated that while the data is welcome, inflation remains “too high”, with the US central bank stressing its commitment to curb inflation.

On Thursday, Mary Daly of the San Francisco Fed said inflation remains high and that she favors a 50 basis point rate hike. However, she does not rule out a rate hike of 75, but she would depend on the data. On Friday, Thomas Barkin of the Richmond Fed said the inflation data is welcome, but he wants to see a sustained period of controlled inflation. Barkin added that he is undecided about the September FOMC monetary policy meeting.

Meanwhile, the dollar index recovers some ground on the day, up 0.56% to trade at 105,676, to finish below 106,000.

what to watch

July’s consumer price index will be published on the Canadian economic docket, as well as housing starts and retail sales. In the United States, New York Fed manufacturing data, housing data, industrial production and retail sales will be published.

Key technical levels