Overview
The USD to CAD forex pair is showing resilience, eyeing its fourth consecutive weekly gain despite data that U.S. inflation in July was softer than anticipated.
US Inflation Misses Forecast
U.S. consumer inflation data from Thursday reported a 0.2% rise, consistent with June’s figures, and a year-on-year increase of 3.2%, slightly under Reuters’ projection of 3.3%. While the Forex pair initially dipped after this reveal, it recuperated as the day progressed, showcasing its strength. The core CPI reading, which excludes volatile food and energy prices, increased by an annual 4.7%.
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Fed Expected to Retain Rates
Investors remain confident that the Federal Reserve will retain its benchmark interest rate between 5.25-5.5% during its September gathering. The recent inflation report adds weight to this speculation, with futures traders estimating a near-90% probability of this scenario – an increase from an already dominant 85% prior to the data’s release.
Fed’s Daly Cautions on Rate Halt
Contrarily, there’s a growing belief that the U.S. central bank can achieve an economic “soft landing” due to subdued inflation and a relaxing labor market. Yet, this optimism isn’t universal. San Francisco Fed President Mary Daly recently conveyed hesitance, suggesting it might be early to believe the central bank has halted its rate hikes.
Short-Term Outlook
Despite the initial dip post-inflation data, the recovery of USD to CAD indicates a bullish sentiment. Later today, the focus will shift to U.S. producer price inflation data, providing further direction for investors.
Technical Analysis
Currently, the currency pair trades near the upper end of its main resistance area, with a significant support buffer below. Overall, the market appears bullish for the USD to CAD.
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