USD/CAD gains traction above the 1.3580 mark, eyes on Fed’s Powell speech

• USD/CAD trades in positive territory for the second consecutive day. 
• The US economic data showed mixed results, Hawkish comments could lift the US Dollar.
• Money markets lowered their expectations for a quarter-point rate rise in the Bank of Canada (BoC) September meeting.
• Market participants will keep an eye on Friday’s Fed Chairman Jerome Powell's Speech.

The USD/CAD pair gains momentum below the 1.3600 barrier during the early Asian trading hours on Friday. The major pair currently trades around 1.3583, up 0.01% on the day. Meanwhile, The US Dollar Index (DXY) climbs above 104.00, the highest in 11 weeks. Market participants await the Federal Reserve (Fed) Chairman Jerome Powell’s speech for fresh impetus.

On Thursday, Philadelphia Federal Reserve (Fed) President Patrick Harker indicated at the Jackson Hole Symposium that the central bank has probably done enough with restrictive monetary policy. He also said that the Fed would keep interest rates steady this year, but that next year will be determined by data. While Boston Fed President Susan Collins said that more rate hikes are possible. However, providing a clear signal about the timing of the rate cut is premature. Hawkish comments from the Fed officials could boost the Greenback and act as a tailwind for USD/CAD.

About the data, US Durable Goods Orders MoM declined -5.2% in July, above expectations of -4% but falling short of the previous month's gain of 4.4%. This is the greatest drop since April 2020. Meanwhile, the Chicago Fed National Activity Index increased to 0.12 in July from -0.33 prior, and the Kansas Fed Manufacturing Activity Index rose to 12.0 in August from -20.0 in the previous month.

On the Loonie front, Statistics Canada showed on Wednesday that monthly Canadian Retail Sales for June expanded by 0.1% from the previous month, better than the expectation of 0%. On a monthly basis, Retail Sales declined 0.8%, worse than the market consensus of an increase of 0.3%.

Following the publication of Canadian Retail Sales data, money markets lowered their expectations for a quarter-point rate rise in the Bank of Canada (BoC) September meeting. Investors priced in an 18% possibility once the data was released, compared to 27% prior. It’s worth noting that the BoC increased its interest rate by 25 basis points (bps) to 5%. In its July meeting. Meanwhile, a decline in oil prices weakens the Loonie as Canada is the largest exporter of crude to the US.

Moving on, Fed Chairman Jerome Powell's Speech on Friday will be a closely watched event. The speech could provide insights into economic conditions and hints as to whether inflation is under control or whether additional interest rate hikes are required to combat inflation. Traders will take cues and find trading opportunities around the USD/CAD pair.