USD/CAD extends decline below 1.3750 ahead of US Retail Sales
- USD/CAD trades in negative territory near 1.3720 on the softer US Dollar on Tuesday.
- Fed’s Harker said it is appropriate to keep rates on hold and wait for more data.
- Higher crude oil prices lift the commodity-linked Loonie and weigh on the pair.
The USD/CAD pair extends downside around 1.3720 during the early Asian session on Tuesday. The decline of the USD Index (DXY) and the rebound of crude oil prices weigh on the pair. The US Retail Sales and Industrial Production are due later in the day. Also, the Fed Lisa Cook, Thomas Barkin, Adriana Kugler, Lorie Logan, Alberto Musalem, and Austan Goolsbee are set to speak.
The US Federal Reserve (Fed) officials have maintained a cautious stance, noting that the Fed may need to keep rates for longer than markets expected for more cooling inflation data. Philadelphia Fed President Patrick Harker said that if the US economy behaved as he expected, one rate cut would be “appropriate” by the end of 2024, adding that it is fine to keep rates on hold and wait for more data.
Earlier, Cleveland Fed President Loretta Mester stated that she would like to see good-looking inflation data, while Minneapolis Fed President Neel Kashkari said that it would be a “reasonable prediction” that the Fed will wait until December to cut interest rates. Market expectations for rate cuts have clashed with the Fed's rate cut predictions through 2024. According to the CME's FedWatch Tool, financial markets see nearly 60% odds of at least 25 basis points (bps) of rate cuts at the September meeting.
On the Loonie front, crude oil prices edge higher as investors expect an increase in summer fuel demand due to a hotter-than-average season. This, in turn, boosts the commodity-linked Canadian Dollar (CAD) as Canada is the largest Oil exporter to the United States (US).