- USD/CAD extends losses amid a solid recovery in oil price due to an upbeat outlook.
- US headline inflation is seen growing at a 0.6% pace in August due to rising gasoline prices.
- Stronger-than-anticipated Canadian labor market data could force the BoC to raise interest rates further
The USD/CAD pair extends its two-day losing spell after slipping below Monday’s low of 1.3560 in the early New York session. The Loonie asset faces selling pressure as the oil price soars to near $90.00. Investors channel funds into the oil price as OPEC sees robust demand for energy, knowing that the learning curve of various economies in absorbing the burden of higher interest rates will improve significantly.
It is worth noting that Canada is the leading exporter of oil to the United States and higher oil prices are strengthening the Canadian Dollar.
S&P500 is expected to open on a slightly bearish note, considering negative cues from overnight futures. Meanwhile, investors remained cautious over August inflation data, which is scheduled for Wednesday.
As per the estimates, the headline inflation grew at 0.6% vs. the former reading of 0.2% due to rising gasoline prices. While core CPI that excludes volatile oil and food prices rose at a steady pace of 0.2%. The US Dollar Index (DXY) recovers further to near 104.90 as investors remain worried about the global slowdown.
A surprise rise in the inflationary pressures would force Federal Reserve (Fed) policymakers to focus more on further policy tightening as the ‘last mile’ of inflation above the desired rate of 2% will be a hard nut to crack.
On the Canadian Dollar front, stronger-than-anticipated labor market data could force the Bank of Canada (BoC) to raise interest rates further. The Canadian labor market witnessed 39.9K new payrolls in the overall laborforce in August, more than doubled the expectations of 15K. In July, the labor force witnessed a reduction of 6.4K payrolls. The Unemployment Rate remains unchanged at 5.5% while investors forecasted a higher jobless rate at 5.6%.