USD/CAD delivers modest recovery ahead of core PCE Inflation data

• USD/CAD gauges support near 1.3520 while the US Dollar’s recovery remains swift.
• The oil price rallied above $82.00 on Thursday as the oil market is expected to tighten further.
• As per expectations, Canada’s Q2 GDP expanded at a 0.3% pace, slower than Q1’s growth rate of 0.8%.

The USD/CAD pair found a cushion near 1.3520 and defended its psychological support of 1.3500 after a recovery move in the US Dollar. The Loonie asset delivered a nominal recovery while the pace of rebound in the US Dollar Index (DXY) was higher. The rebound move in the Lonnie asset remained modest as the Canadian Dollar strengthened due to a rally in oil prices.

S&P500 futures remain lackluster in Europe as investors await Personal Consumption Expenditure (PCE) price index data for July.

Analysts at CMC markets said July inflation numbers could prompt further concern about sticky inflation on the recording of sizeable ticks higher in the monthly as well as annual headline numbers. August CPI numbers were evidence that prices might struggle to move much lower after headline CPI edged higher to 3.2%. Investors can see a similar move in this week’s numbers, with a move to 3.3% in the deflator and to 4.3% in the core deflator.”

The US Dollar Index recovered swiftly to near 103.60 after discovering the 103.00 figure as a crucial support. After the Fed’s preferred inflation tool, investors will focus on the Nonfarm Payrolls (NFP) data, which will be published on Friday. Scrutiny of the US ADP Employment Change report indicates that fresh payrolls were weaker than anticipated and wage growth remained slowest since October 2021.

The oil price rallied above $82.00 on Thursday as the oil market is expected to tighten further. Bloomberg reported that Saudi Arabia is expected to extend a million-barrel oil supply cut into October, as it seeks to shore up prices against a faltering economic backdrop.

It is worth noting that Canada is the leading exporter of oil to the United States and higher oil prices strengthen the Canadian Dollar.

The Canadian Dollar will remain in action on Friday amid the release of Q2 Gross Domestic Product (GDP) data. Investors hope that the April-June quarter expanded at a 0.3% pace, slower than Q1’s growth rate of 0.8%.