During the early Asian session on Monday, the USD/CAD pair exhibited weakness, trading below 1.3500. Both US and Canadian markets remained closed in observance of the President’s Day holiday and Family Day, respectively. Investors are eagerly awaiting cues from the upcoming Canadian Consumer Price Index (CPI) for January, with expectations that it may ease to 3.2% YoY from the previous month’s 3.4%. At present, the USD/CAD is hovering around 1.3480, marking a modest 0.02% gain for the day.
In the United States, the Producer Price Index (PPI) reported a notable increase, climbing 0.3% MoM in January, a significant shift from the 0.1% decline observed earlier. The core PPI, excluding food and energy, also saw a robust rise of 0.5% MoM, surpassing expectations for a 0.1% gain. Annually, the headline PPI registered a 0.9% YoY increase, while the Core PPI escalated to 2.0% from the previous reading of 1.7%, as reported by the Bureau of Labor Statistics, Department of Labor on Friday. This unexpectedly robust inflation report underscores the persistent nature of inflation, potentially influencing the Federal Reserve (Fed) to reconsider interest rate cuts.
On the Canadian front, Bank of Canada (BoC) Deputy Governor Toni Gravelle, in remarks from last March, indicated that policymakers anticipated concluding quantitative tightening by late 2024 or early 2025. However, recent speculations among short-term traders suggest a potential acceleration of this trend. Additionally, the surge in oil prices, given Canada’s status as the largest oil exporter to the United States, could bolster the Canadian Dollar and limit upward movements in the USD/CAD pair.
Looking ahead, market observers will closely monitor the Canadian Consumer Price Index (CPI). Later in the week, attention will shift to the release of the Federal Open Market Committee (FOMC) Minutes on Wednesday and Canada’s Retail Sales data on Thursday.
