USD/CAD pares earlier losses

US data revealed, Friday morning, lifted the USD/CAD above its 100-DMA when the University of Michigan showed that the US Consumer Sentiment improved from 52.5 as estimated to 55.1, reaching a three-month high. That is very good news for the Federal Reserve policymakers; however, US inflation expectations for a 5-year horizon jumped above the 3% threshold, while in the short-term, one year, decreased to 5% from 5.2% estimated.

The USD/CAD pair pared its earlier losses, and advances on Friday, erasing Thursday’s losses, after a positive US consumer sentiment report boosted investors’ appetite, pushing US equities higher while the US dollar rose again. At the time of writing, the USD/CAD is trading at 1.28.

The pair is set to finish the trading week with losses of 1.22%. The University of Michigan Consumer Sentiment for August surprises the upside and further boosts the US dollar. US Fed officials are still committed to tackle inflation and reiterated their job has not been done yet, signaling additional rate decisions in the upcoming FOMC meetings.

The pair also exchanges hands above its opening price, but earlier in the European session, it tumbled to the daily low at 1.2739, but buyers moved in and lifted the pair above the 100-day EMA at 1.2795. Nevertheless, once the dust settled, the pair stabilized around current prices.

During the week, US inflation data pointed downwards, led by CPI down at 8.5%, while the PPI decelerated to 8.5%. However, Fed officials reiterated that even though data is welcomed, inflation still is “too high,” so the US central bank emphasized its commitment to tackling inflation.

On Thursday, San Francisco’s Fed Mary Daly said that inflation remains high and that she favors a 50 bps rate hike. However, she does not discount a 75 rate hike, but it would depend on data. On Friday, Richmond’s Fed Thomas Barkin said that inflation data is welcome, but he wants to see a sustained period of inflation under control. Barkin added he’s undecided about September’s FOMC monetary policy meeting.

In the meantime, the US Dollar Index is recovering some ground in the day, is up 0.56%, at 105.676, set to finish below the 106.000 mark.

The Canadian economic docket will feature the Consumer Price Index for July, alongside Housing Starts and Retail Sales. On the US side, the calendar will feature the NY Fed Manufacturing, Housing data, Industrial Production, and Retail Sales.