USD/CAD consolidates above 1.3000, eyes 18-month highs above 1.3050 amid buoyant buck

• USD/USD is consolidating just above 1.3000, not far below 18-month highs at 1.3050.
• A strong US dollar amid recent hot US inflation data and risk-off flows is outweighing higher oil prices.
• Focus is on upcoming comments from BoC’s Tony Gravelle from 1630BST.

USD/CAD stabilised just below multi-month highs in the low 1.3000s on Thursday, as a downturn in global macro risk appetite coupled with the strong performance of the safe-haven US dollar offered the pair support. At current levels around 1.3020, the pair is trading with gains of about 0.25% on the day and earlier came within a whisker of hitting Tuesday’s more than 18-month highs just above 1.3050.

Given US CPI and PPI data over the past two days, both of which showed an (as far as the Fed is concerned, anyway) insufficient moderation of inflationary pressures, it's not surprising to see the US dollar performing so well. The data means that the Fed will likely press ahead with its current aggressive tightening plans and, with fears about central bank tightening weighing heavily on global equities, the buck is also deriving support as a safe haven.

A rebound from earlier session lows in crude oil prices has failed to revive the loonie, which seems likely to continue to trade on the back foot in the run-up to commentary from BoC’s Deputy Governor Tony Gravelle at 1630BST. Gravelle might offer further hints about the extent and timing of the BoC’s monetary tightening plans. Traders should note, however, that the BoC’s hawkish stance has failed to shield the loonie from the US dollar’s advances in recent weeks and probably won’t start this Thursday.