USD/CAD holds above the 1.3220 mark ahead of FOMC decision
- USD/CAD remains steady around the 1.3225 mark after gaining momentum from softer Canadian Retail Sales.
- Canadian Retail Sales MoM rose 0.2% compared to the 0.5% expected.
- Investors will take cues from the Federal Reserve’s (Fed) policy decision, Fed Chair Jerome Powell’s speech.
The USD/CAD pair posts modest gains around the 1.3225 mark during the Asian session on Monday. The Loonie declines against the US Dollar following Friday’s release of Canadian Retail Sales. Market participants prefer to move to the sidelines during the busy week of economic data and await the Federal Reserve’s (Fed) rate decision.
On Friday, Statistics Canada revealed that Canadian Retail Sales MoM rose 0.2% compared to the 0.5% expected and 1.0% the previous month. Also, Retail Sales ex-autos fell short of expectations, with a 0.0% increase in May, against the consensus of 0.3% and a 1.2% increase in April. The softer Canadian Retail Sales data weighed on the CAD and lifted the USD/CAD pair.
The softer Canadian Retail Sales data weighed on the CAD and lifted the USD/CAD pair. This figure suggested that the economy is slowing in line with the Bank of Canada’s projections, and market participants anticipated that the Bank of Canada (BoC) will likely not see the need to raise rates further this year.
Meanwhile, the renewed tension between Russia and Ukraine might further tighten oil supplies. This in turn, might cap the upside in the USD/CAD pair and lift the commodity-linked Loonie.
On the other hand, US Retail Sales fell short of expectations, indicating consumer resilience, and housing market data fell after posting positive figures in May. On a positive note, the Unemployment Claims showed a solid figure. The number of people claiming unemployment benefits was lower than expected for the second week of July and registered the lowest reading since mid-May.
The anticipation for the Fed to raise rates after the July meeting increased to 28% from 15.9% last month, according to the CME FedWatch Tool. Market players will keep an eye on the monetary policy decision on Wednesday and Chair Jerome Powell’s press conference. Investors will take cues from Fed Chair Jerome Powell’s speech on whether the central bank will likely continue hiking rates. This key event will trigger volatility across financial markets.
Moving on, the Federal Reserve’s (Fed) policy decision will be a closely watched event. A rate hike of 25 basis points (bps) is already priced in. The interest rate decision could significantly impact the US Dollar’s dynamic and give the USD/CAD pair a clear direction.