USD/CAD faces pressure near 1.3640 ahead of Canada’s Inflation and US Retail Sales data

• USD/CAD struggles to extend upside above 1.3640 ahead of key economic data.
• The market mood is broadly risk-off amid deepening Middle East tensions.
• Fed policymakers are advocating for stable monetary policy as long-term bond yields are near multi-year highs.

The USD/CAD pair finds some selling pressure after recovering to near 1.3640 from the round-level support of 1.3600. The Loonie asset is expected to remain on the tenterhooks as investors are awaiting Canada’s inflation data and United States Retail Sales data for September.

S&P500 futures added some losses in the European session, portraying a decline in the risk appetite of the market participants. The risk-perceived assets are under pressure amid deepening Middle East tensions as Israel's military is preparing for a ground offensive in Gaza against Hamas.

Meanwhile, the visit of US President Joe Biden to Israel to evacuate civilians from Gaza safely amid military attacks from Palestine military group will be in focus.

The US Dollar Index (DXY) consolidates around 106.60 as investors hope that the Federal Reserve (Fed) keep interest rates unchanged on November 1. Fed policymakers are advocating for keeping interest rates unchanged at 5.25-5.50% as long-term bond yields are hovering near multi-year highs and are sufficient to keep pressure on spending and investments.

Going forward, investors await the US Retail Sales data for September. As per the consensus, the consumer spending momentum expanded at 0.3%, almost half of August’s growth rate.

On the Canadian Dollar front, investors await the inflation data for September. On a monthly basis, the headline Consumer Price Index (CPI) is seen up by 0.1%, declining from the previous 0.4% increase. The annual headline CPI is seen growing at a steady pace of 4%. The core figures are seen expanding at a steady pace of 0.1% and 3.3% on a monthly and an annual basis respectively.