USD/CAD approaches 1.3600 as Canada’s general consumer spending weakens

• USD/CAD marches towards 1.3600 as Canada’s Retail Sales excluding automobiles contract sharply.
• Canada’s consumer spending for goods and services other than automobiles contracted at a higher pace of 0.8%.
• The US Dollar Index is expected to demonstrate a volatile action after the release of the S&P Global preliminary PMI data.

The USD/CAD pair is marching sharply towards the round-level resistance of 1.3600 as Statistics Canada reported mixed Retail Sales data for June. Consumer spending for goods and services other than automobiles contracted at a higher pace of 0.8% vs. 0.3% pace of contraction recorded for May while investors projected an expansion by 0.3%.

Overall Retail Sales expanded by 0.1%, in line with May’s reading while market participants anticipated a stagnant performance. A vulnerable consumer spending would allow the Bank of Canada (BoC) to keep interest rates steady ahead.

S&P500 futures generate decent gains in Europe, portraying a recovery in the risk appetite of the market participants. US equities witnessed selling pressure on Tuesday as investors remained cautious about the Jackson Hole Symposium.

Investors are expecting that Federal Reserve (Fed) chair Jerome Powell will explain the benefits of keeping interest rates higher for a longer period. In July’s monetary policy meeting, Jerome Powell announced that further policy tightening would be data-dependent.

Richmond Fed Bank President Thomas Barkin said if inflation remains high and signs of a drop in demand remain absent. The situation will force the need for tighter monetary policy.

The US Dollar Index (DXY) resumes its upside journey after delivering a breakout of the consolidation formed in a range of 103.00-103.67. The USD Index picks strength as developing economies have been exposed to recession due to a bleak economic outlook and higher interest rates. Contrary, the 10-year US Treasury Yields dropped below 4.3% as more interest rate hikes from the Fed are less likely.

In the early New York session, investors will focus on the United States preliminary PMI data for August to be reported by S&P Global. For August, the S&P Global Manufacturing PMI Index is likely to improve further to 49.3. The Services PMI, however, is expected to drop to 52.2 in the reported month, compared with July’s 52.3 print. The Composite PMI is seen unchanged at 52.0 in August.