USD/CAD gains traction above the 1.3250 mark, eyes on Canadian, US employment data

• USD/CAD reclaimed the 1.3250 mark at the start of a new week.
• The Canadian Gross Domestic Product (GDP) grew by 0.3% in May, matching market consensus.
• The US annual Personal Consumption Expenditures (PCE) Price Index rose at its slowest pace in over two years.

The USD/CAD pair kicks off the new week on a positive note and edges higher above the critical resistance area at 1.3250 during the early Asian session. Market participants will keep an eye on Canadian and US employment data later this week. The major pair currently trades around 1.3260, up 0.06% for the day.

Statistics Canada showed on Friday that the Canadian Gross Domestic Product (GDP) grew by 0.3% in May, matching market consensus. However, the figure is likely to contract in June, suggesting an economic slowdown in the country. This could bring an end to the Bank of Canada's (BoC) tightening cycle that has pushed interest rates to a 22-year high.

That said, the BoC announced a 25 basis point (bps) rate hike to 5.0% on July 12. BoC Governor Tiff Macklem disclosed that future policy decisions would be based on incoming data and the inflation outlook. Market participants anticipated that the Bank of Canada (BoC) would not deem it necessary to increase interest rates further this year.

Meanwhile, the uptick in oil prices has supported the Loonie and offset a slowdown in the Canadian manufacturing sector. Higher crude prices strengthen the Canadian Dollar, as the country is the leading oil exporter to the United States. 

On the US Dollar front, annual US inflation grew at its slowest pace in over two years. The US Bureau of Economic Analysis reported on Friday that the Personal Consumption Expenditures (PCE) Price Index fell from 3.8% in May to 3% in June, below the market expectation of 3.1%. While the Federal Reserve's preferred measure of inflation, the Core PCE Price Index, came in at 4.1% annually, down from 4.6% in May and below market expectations of 4.2%. Finally, Personal Income and Personal Spending MoM increased by 0.3% and 0.5%, respectively. The softer data indicates pricing pressures are easing and may bring the Federal Reserve (Fed) closer to the end of its hiking cycle.

Later this week, investors will closely watch the Canadian employment data on Friday. Also, the US ADP Employment Change for July and Nonfarm Payrolls will be key events to monitor. The data will be critical for determining a clear movement for the USD/CAD pair.