Ella 
USD/CAD broke through the 1.3700 round-number resistance in Asian trading on Thursday. As the dollar strengthens, Canadian dollar assets aim to recapture the one-week high near 1.3740. Traders’ bets on the Federal Reserve (Fed) to cut interest rates at its September meeting have fallen sharply, driving strong demand for the dollar.
Investors remain risk-averse as the market is worried that the Fed will delay rate cuts until the last quarter of the year. S&P 500 futures fell sharply in Asian trading, reflecting the sharp drop in investors’ risk appetite. The U.S. dollar index (DXY), which tracks the value of the U.S. dollar against six major currencies, jumped above the key resistance level of 105.00.
The Fed will “maintain higher interest rates for longer”, which is a good sign for interest-bearing bond yields. The 10-year Treasury yield fell slightly to 4.61%, but it is close to a nearly four-week high.
Meanwhile, investors are awaiting the U.S. core personal consumption expenditures price index (PCE) data for April, which will have a significant impact on the Fed’s prospects for a rate cut in September. Underlying inflation data will be released on Friday. The US PCE price index inflation annual rate and core PCE price index monthly rate are expected to be 2.8% and 0.3% respectively.
