Ella 
USD/CAD retreated from eight-month highs of 1.3849 recorded in the previous session, trading around 1.3820 during Monday’s Asian session. Rising oil prices are supporting the Canadian dollar (CAD) and putting downward pressure on USD/CAD.
At press time, West Texas Intermediate crude oil was trading at $76.80. According to Reuters, tensions in the Middle East may escalate after a rocket attack in the Israeli-occupied Golan Heights, which Israel and the United States (US) believe was launched by the Lebanese armed group Hezbollah.
Israel’s security cabinet on Sunday authorized Prime Minister Benjamin Netanyahu’s government to determine “the manner and timing” of a response to rocket attacks.
Additionally, the U.S. dollar (USD) faces challenges as U.S. inflation cools and labor market conditions slow, fueling expectations that the Federal Reserve (Fed) will cut interest rates three times this year starting in September.
The U.S. personal consumption expenditures (PCE) price index released last Friday showed a slight increase in inflation in June, further indicating that price pressures have eased, thus strengthening the above expectations.
The U.S. PCE price index grew at an annual rate of 2.5% in June, slightly lower than May’s 2.6%, in line with market expectations. The U.S. PCE price index rose 0.1% on a monthly basis in June after remaining flat in May.
The core PCE price index, which excludes volatile food and energy prices, also climbed to an annual rate of 2.6% in June, the same as May’s increase and above expectations of 2.5%. The core PCE price index rose 0.2% monthly in June, compared with 0.1% in May.
