USD/CAD trades on a softer note below 1.3700 ahead of US PMI data
- USD/CAD trades in negative territory for the fifth consecutive day around 1.3695 on Tuesday.
- The high-for-longer US rate narrative might boost the USD and cap the pair’s downside.
- Canadian Industrial Produce Prices dropped by 0.8% MoM in March compared to a rise of 1.1% prior, in line with the consensus.
The USD/CAD pair extends its downside near 1.3695 despite lower crude oil prices. However, the downside of the pair might be capped by strong US economic data and the Fed’s hawkish comments. Investors will keep an eye on the US S&P Global Purchasing Managers Index (PMI) ahead of US Gross Domestic Product (GDP) and US Core Personal Consumption Expenditures (PCE) later this week.
Many Fed policymakers agreed with the idea of keeping borrowing costs at the current level, given the slow and bumpy progress on inflation and the robust US economy. New York Fed President John Williams said he doesn't feel urgency to cut interest rates, given the strength of the economy. Chicago Fed Austan Goolsbee stated that the Fed's current restrictive monetary policy is appropriate due to the robust US economic data. The high-for-longer rate narrative in the USD might lift the greenback against its rivals. The Core US PCE might offer some hints about the further confirmation that progress against inflation has stalled.
On the Loonie front, data released from Statistics Canada revealed that Canadian Industrial Produce Prices were in line with market expectations, easing by 0.8% MoM in March from the previous month’s 1.1% (revised upward from 0.7%). Meanwhile, the decline of WTI prices exerts some selling pressure as Canada is the largest oil exporter to the United States. Canada’s Retail Sales will be released on Thursday, which is estimated to improve to 0.1% MoM in February from a decrease of 0.3% in January.