USD/CAD Pauses as Attention Shifts to US Data and Jackson Hole Symposium for Direction

By Usman Ahmed August 24, 2023, 2:43 pm • Posted in Forex

The Loonie pair swung around from a three-month high the day before USD/CAD bears returned to the table. As of Thursday AM in Europe, the quotation was still unsure around 1.3520.

The Loonie pair reflects the market’s hesitance ahead of a deluge of US data and the start of the two-day Jackson Hole Symposium. Trading USD/CAD was complicated by shifting oil prices and a weak US dollar.
While WTI crude oil, Canada’s principal export, falls to approximately $78.40 from a one-month low on Wednesday, the US Dollar Index (DXY) is stuck at 103.40 after reversing from an 11-week high the day before.

To the dismay of Oil and USD/CAD traders, the market’s assumption of weaker energy demand owing to the recent dismal PMIs was at odds with the weekly stockpile data from the US Energy Information Administration (EIA).

Although bears had anticipated higher rates the day before, the USD/CAD pair has taken a hit as dismal Canadian data have dampened enthusiasm for the US economy.

The August reading for the US S&P Global Manufacturing PMI was 47.0, down from 49.0 and below market expectations of 49.3, while the Services PMI also dropped to 51.0 from 52.2 expected and 52.3 the previous month. Both readings were released on Wednesday. For the month of March, the S&P Global Composite PMI for the United States dropped to 50.4 from 52.0 and consensus forecasts. The MoM change in July US New Home Sales was 4.4%, up from -2.5% in June.

Retail Sales in Canada increased 0.1% MoM in June, beating market expectations of 0.0%, while Retail Sales excluding automobiles dropped 0.8%, versus decreases of 0.3% and 0.1%, respectively.

S&P500 Futures rose 0.5% to 4,470 at press time, mirroring the market’s mood after reaching its highest point in a month the day before. US 10-year Treasury note rates have stalled at 4.20% after falling from their highest level since 2007 for two days. This is the largest daily decline in three weeks.

Several key economic indicators exist to watch, including US Durable Goods Orders, the Chicago Fed National Activity Index, Kansas Fed Manufacturing Activity, and weekly Jobless Claims. As recent US figures suggest the end of the rate rise cycle, which might weigh on the US Dollar and boost Loonie pair sellers, it will be especially important for explicit instructions from Fed Chairman Jerome Powell in his support of hawkish monetary policy.