Ella 
In early Asian trading on Monday, USD/CAD consolidated its gains and encountered resistance at the 1.3500 mark. A weak U.S. dollar and falling U.S. bond yields weighed on USD/CAD. As of press time, USD/CAD was trading around 1.3476, with an intraday decrease of 0.05%.
Statistics Canada reported on Friday that Canadian retail sales increased 0.3% month-on-month in July, below expectations of 0.4%. Core retail sales rose 1.0% from -0.7%, higher than market expectations of 0.5%. Additionally, a rebound in oil prices has supported the commodity-linked Canadian dollar and could limit USD/CAD upside as Canada is a major oil exporter to the United States.
On the other hand, Boston and San Francisco Fed Presidents Susan Collins and Mary Daly stressed that although inflation is cooling. But further interest rate hikes are still necessary. Still, talk of “long-term interest rate hikes” has boosted the USD against its major pairs and could serve as a “tailwind” for the USD/CAD pair.
On Friday, the U.S. S&P Global Manufacturing Purchasing Managers’ Index rose to 48.9 in September from 47.9 in August, indicating continued contraction in business activity in the manufacturing sector. Meanwhile, the services PMI fell to 50.2 from 50.5 the previous month. Finally, the composite PMI fell to 50.1, down slightly from 50.2 in August.
Market participants will be closely watching Friday’s release of Canada’s July gross domestic product. The key story this week is the U.S. core personal consumption expenditures (PCE) price index, the Fed’s preferred measure of consumer inflation. The PCE price index is expected to fall to an annual rate of 3.9% from 4.2%. These data will provide direction for the USD/CAD pair.
