The Canadian Dollar loses its earlier gains as the US Dollar strengthens ahead of critical talks between former President Trump and Ukrainian President Zelenskyy. The USD/CAD pair is seen climbing towards the 1.3800 level during the early hours of the American session, reversing its prior decline.
Traders Brace for Key Economic Data Amid Trump-Zelenskyy Talks
Market participants remain cautious ahead of the upcoming Canada CPI report on Tuesday, which could influence the Bank of Canada’s (BoC) policy decisions. As the US Dollar sees a modest recovery, traders are also focused on the data-heavy week ahead, with events such as the release of the Federal Reserve’s meeting minutes and the Jackson Hole Symposium.
The USD/CAD pair is trading slightly higher after recovering from a low of 1.3783, as the US Dollar Index (DXY) rebounds towards the 98.00 level. Despite the ongoing market expectation of a 25 basis point rate cut from the Fed in September, the probability has slightly decreased from last week’s near-certainty. This shift in sentiment is limiting the further upside potential for the Greenback.
Meanwhile, Canada’s inflation data for July, due on Tuesday, will provide fresh insights into the BoC’s policy outlook. Headline CPI is expected to rise 0.4% month-over-month, up from 0.1% in June, while the annual rate is anticipated to ease to 1.7% from 1.9%. Underlying inflationary pressures are expected to remain persistent, with the BoC’s Core CPI forecast to rise 0.4% MoM.
The release of the CPI data will likely play a significant role in shaping market expectations for the Bank of Canada’s next moves. A weaker-than-expected headline CPI could reignite rate cut speculation, while stubborn core inflation could limit the BoC’s ability to ease monetary policy in the near term.
Summary
The Canadian Dollar loses earlier gains as the US Dollar strengthens ahead of key talks between former President Trump and Ukrainian President Zelenskyy. The USD/CAD pair rises towards 1.3800, with traders cautious ahead of Canada’s July CPI report, which may influence the Bank of Canada’s policy outlook. Meanwhile, the US Dollar sees a modest recovery, as the Fed’s expected rate cut in September loses some likelihood. Canada’s inflation data, due Tuesday, could provide mixed signals for the BoC, with headline CPI expected to rise, but core inflation pressures remaining persistent.
