USD/CAD climbs above 1.3000 on downbeat mood, and USD strength

• The USD/CAD buyers regain control and lift the pair above 1.3000, eyeing 1.30776.
• Decreased risk appetite and investors’ positioning ahead of the US CPI to keep the USD/CAD upward pressured.
• The Bank of Canada (BoC) is expected to hike rates by 75 bps, as shown by STIRs futures.

The USD/CAD snaps three days of consecutive losses and bounces off last week’s lows around 1.2930s due to a stronger greenback, bolstered by investors positioning ahead of a US inflation reading expected to remain hot and China’s coronavirus reemergence, particularly in Shanghai, threatening to derail the global economic growth.

After reaching a daily high at around 1.3030s, 100 pips up from the daily lows, the USD/CAD is trading at 1.3002, gaining some 0.51% during the North American session at the time of writing,

USD/CAD rises on risk-aversion and falling oil prices

Stocks slid while the greenback remains in the driver’s seat, as shown by the US Dollar Index, rallying more than 1%, printing a fresh YTD high at around 108.211, while US Treasury yields fell on safe-haven appetite. Those factors, alongside falling US crude oil prices with WTI trading at $103.68 BPR,  are a headwind for the loonie, which trimmed last week’s losses since last Wednesday.

In the week, the Canadian economic calendar illustrated that the Bank of Canada (BoC) would have its monetary policy meeting, where the bank is expected to hike rates from 1.50% to 2.25%, a 75 bps. Money market futures STIRs, priced in a 99.8% chance of a 0.75% rate increase, while odds of a 1% upward move sit at 74.9%.

Analysts at TD Securities wrote in a note that the BoC Business and Consumer Surveys provided new evidence of rising inflation expectations, further cementing the case for a 75 bps rate hike. Additionally, “With the economy operating in excess demand and inflation running well above the target, we see little room for nuance at the upcoming meeting and look for a broadly hawkish tone.”

Furthermore added that “The policy statement should also repeat that rates need to rise further and that the Bank is prepared to act more forcefully if needed.”

On the US front, the US economic calendar is packed, reporting that US inflation readings for consumers and producers, with both numbers estimated at the top of the range. Late in the week, US Retail Sales are expected to be higher, and the  University of Michigan Consumer Sentiment would be in the spotlight after June’s figures triggered a market shift and weighed on the Federal Reserve rate hike decision, according to some Fed speakers.

USD/CAD Key Technical Levels