USD/CAD trades sideways near 1.3530, awaits US Homes Sales and Jackson Hole

• USD/CAD consolidates and seeks fresh impetus on monetary policies from both countries.
• BoC adjusted its forecast that a slowdown in inflation would take longer.
• Traders aim to gather more cues on the economic situation and inflation outlook.

USD/CAD consolidates around 1.3530, treading water to extend an upward trend for the fifth consecutive week. The US Dollar (USD) gets support due to improved US economic data and elevated United States (US) Treasury yields. Market participants could turn cautious and seek more information that could provide them with an insight into the direction regarding potential US Federal Reserve’s (Fed) monetary policy before placing fresh bets on the USD/CAD pair.

On the other hand, in July, due to robust consumption and resilient labor markets, the Bank of Canada (BoC) implemented a 25 basis points (bps) increase in the interest rate, bringing it to 5%. This move was driven by the aim to address persistent inflationary pressures. The central bank adjusted its projection that a slowdown in inflation would take longer than earlier expectations.

Looking ahead, investors are anticipating the potential for another 25 bps interest rate hike during the upcoming policy meeting in September. However, during the previous week, Canada’s better inflation figures were not able to stem the weakening of the Canadian Dollar (CAD).

The US Dollar Index (DXY), which gauges the strength of the US Dollar (USD) against a basket of six major currencies, trades slightly lower around 103.30. Investors could turn cautious and aim to gather more cues on the economic situation and inflation outlook from upcoming Fed Chair Jerome Powell's speech during the Jackson Hole Symposium.

Market participants will closely monitor upcoming US data releases during the week, namely Home Sales and the preliminary S&P Global PMI surveys for August along with Canada’s Retail Sales. These datasets could offer a more distinct view of the situation, helping investors to assess the potential course of action by both economies.