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The USD/CAD pair rebounds from a six-week low set on Friday amid the emergence of fresh USD buying. The upbeat US PCE report revives Fed rate hike bets and remains supportive of the USD bounce.
As investors digest the less hawkish FOMC decision and Thursday’s disappointing US GDP print, the US dollar witnesses a turnaround on the last day of the week and offers some support to the USD/CAD pair. The USD recovery from its lowest level since July 5 picks up pace following the release of stronger-than-expected US Personal Consumption Expenditures (PCE report).
An uptick in oil prices, a slightly better Canadian GDP could underpin the Canadian dollar and cap the upside. The pair shows some resilience below the 1.2800 mark and stages a goodish bounce from a six-week low touched earlier this Friday.
The intraday buying remains unabated following the release of US/Canadian macro data and pushes spot prices to a fresh daily high, around mid-1.2800s during the early North American session.
The US Bureau of Economic Analysis reported that the headline index accelerated to 6.8% YoY in June from 6.3% previous. The Core PCE Price Index – the Fed’s preferred gauge of inflation – edged higher to the 4.8% YoY rate as against the 4.7% in May and expected. Further details revealed that Personal Spending and Personal Income rose by 1.1% and 0.6%, respectively.
The positive data might revive bets for a 50 bps Fed rate hike move at each meeting in the remainder of this year. This, along with indications of a cautious opening in the US equity markets, seems to benefit the safe-haven greenback and push the USD/CAD pair higher.
An uptick in crude oil prices could underpin the commodity-linked Canadian dollar and cap the upside. The Canadian dollar, meanwhile, reacts little to the domestic data, which showed that the economic growth remained flat in May. The backwards-looking release passes unnoticed, suggesting that the USD price dynamics might continue to play a key role in influencing the USD/CAD pair.
