The USD/CAD pair is on the rise, nearing the key resistance level of 1.3500 in Friday’s New York session. This increase in the value of the Canadian Dollar (CAD) comes as the US Dollar (USD) sees a sharp uptick, despite softer-than-expected US Personal Consumption Expenditure inflation (PCE) data.
The US Dollar Index (DXY) is at a weekly high of around 101.60, reflecting the strength of the Greenback against major currencies. Market sentiment seems to be focused on specific assets, with the S&P 500 showing strong gains while riskier currencies are under pressure.
The core PCE inflation data, which is closely watched by the Federal Reserve (Fed), rose steadily by 2.6%, slightly below expectations of 2.7%. This data is unlikely to deter market expectations of a Fed interest rate cut in September, as concerns about the labor market outweigh inflation worries.
Despite strong economic growth in Canada, with GDP expanding by 2.1% in the second quarter, the Canadian Dollar is underperforming against the US Dollar. Market expectations of further interest rate cuts by the Bank of Canada (BoC) are keeping pressure on the CAD, despite the positive economic data.
Overall, the rise in the USD/CAD pair is driven by a combination of factors, including the strength of the US Dollar and market expectations of monetary policy changes by both the Fed and the BoC. Investors should keep a close eye on upcoming economic data releases and central bank announcements to stay informed about potential market movements.