- USD/CAD is down slightly as oil prices are likely to rise at the end of the week.
- The U.S. dollar remains weaker ahead of the release of the Michigan consumer sentiment indicator for August.
- Traders are already pricing in a 25 basis point rate cut at the Federal Reserve’s next meeting in September.
USD/CAD halted its two-day gains, trading around 1.3720 during Asian hours on Friday. The Canadian dollar (CAD) is receiving support from improved risk-on sentiment following a stronger-than-expected recovery in U.S. retail sales, which eased concerns about a potential recession in the United States (US).
The commodity-linked CAD could continue to rally as oil prices look set to end the week higher. The rally comes after recent U.S. economic data boosted optimism about demand in the world’s largest oil-consuming nation. Given that Canada is the largest exporter of crude oil to the U.S., West Texas Intermediate (WTI) crude is trading at around $76.60 per barrel at the time of writing.
In the United States, investors are awaiting preliminary data on Michigan’s consumer sentiment index for August and building permits for July, which will be released on Friday, later in the North American session.
The US dollar (USD) is losing ground as traders are fully factoring in a 25 basis point rate cut by the US Federal Reserve in September. However, a 50 basis point cut remains possible, with the CME FedWatch tool indicating a 26% probability of such a move.
However, the Greenback received support from the latest, better-than-expected U.S. data released on Thursday. The U.S. Census Bureau reported that U.S. retail sales rose 1.0% month-over-month in July, a edged reversal from June’s 0.2% decline and beating the forecast for a 0.3% escalate. Also, initial jobless claims for the week ending Aug. 9 came in at 227,000, down from the 235,000 forecast and down from the 234,000 the previous week.
