USD/CAD Slides Near Two-Month Low Ahead of US CPI and Oil Market Volatility
The USD/CAD currency pair has been trading near its two-month low of around $1.3930, but without significant momentum as traders wait for key economic releases and market positioning ahead of Canadian inflation data.
The US Dollar remains firm ahead of Wednesday's US Consumer Price Index (CPI) release, with the CME FedWatch tool indicating a 50% chance of a rate hike at the September meeting.
Oil markets have been volatile due to ongoing tensions in the Strait of Hormuz and proposed arrangements involving Iran and Oman. West Texas Intermediate crude has traded near $81.50 after reaching an intraday high of $83.57, with TD Securities expecting the Bank of Canada to hold its rate at 2.25% through 2026 before returning to 2.75% next year.
Derivative traders are advised to position themselves for heightened volatility ahead of the US CPI release, as a mere 0.1% deviation from consensus in core CPI triggers an average immediate move of 40 pips in the USD/CAD pair.