Ella 
USD/CAD fell to around 1.3460 during the Asian session on Thursday. The pair fell as the U.S. dollar (USD) struggled to sustain Wednesday’s recovery. The U.S. Dollar Index (DXY), which tracks the dollar’s value against six major currencies, was lower from 101.18 after a strong rebound from a yearly low of 100.50.
The dollar is expected to remain volatile as investors will focus on U.S. core personal consumption expenditures (PCE) data for July due on Friday. The PCE report is expected to show core PCE inflation rising to an annual rate of 2.7% from 2.6% in June, with monthly data rising at a steady 0.2%. Inflation data will greatly affect market speculation on the Federal Reserve’s monetary policy in September.
Currently, financial market participants appear confident that the Fed will begin cutting interest rates in September. However, traders remain divided over whether the scale of potential rate cuts will be gradual or steep.
According to the CME FedWatch tool, 30-day federal funds futures pricing data showed a 34.5% chance of a 50 basis point (bps) rate cut in September, while others favored a 25 bps cut.
In the Canadian dollar (CAD), investors are awaiting monthly and second-quarter gross domestic product (GDP) data due out on Friday. The GDP report is expected to show the economy barely grew in June after growing 0.2% in May. Canada’s GDP is expected to grow by 1.6% annually, down from the previous reading of 1.7%. Signs of a cooling economic outlook will bolster expectations for further interest rate cuts from the Bank of Canada (BOC).
