- The Canadian Dollar extends its recovery against the USD in choppy markets, with all eyes on the Trump-Zelenskyy’s meeting..
- The US Dollar remains depressed, with investors pricing an 84% chance of a Fed rate cut in September.
- In Canada, July’s CPI and June’s Retail Sales data will set the Loonie’s near-term direction.
The Canadian Dollar is going through a mild pickup for the second consecutive day against the US Dollar, bringing the USD/CAD pair to test levels below 1.3800 round level. Markets are choppy on Monday with all eyes on a Trump-Zelensky meeting, which is likely to show significant differences on the conditions for a peace deal in Ukraine.
Apart from that, the strong US Retail Sales data released on Friday hardly changed investors’ expectations of immediate Fed cuts. The market is still pricing an 84% chance of a 25 bps cut in September, which is keeping the US Dollar’s upside attempts limited.
Investors, however, are likely to be cautious about placing large US Dollar shorts ahead of Fed Powell’s conference at the Jackson Hole Symposium on Friday. Recent US CPI and Retail Sales Prices have triggered some concerns that the Fed Chief might hold his hawkish stance and dampen September cut hopes further.
In Canada, the focus this week will be on July’s CPI, which is likely to show that price pressure accelerated in July, while Friday’s Retail Sales report is expected to post a significant recovery. In this context, and with the impact of Canadian retaliatory tariffs on the US likely to boost price pressures further, market expectations of a hawkish BoC are likely to provide additional support to the CAD.
