Canadian Dollar falls back against US Dollar in countdown to US flash PMI data

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The Canadian Dollar (CAD) retreats against the US Dollar (USD) on Tuesday after a short-lived pullback move the previous day.

USD/CAD recovers to near 1.4185 due to the US Dollar’s continued outperformance.
The Fed is highly anticipated to raise interest rates this year.
Higher inflation and economic concerns pose stagflation risks in the Canadian economy.

The Canadian Dollar (CAD) retreats against the US Dollar (USD) on Tuesday after a short-lived pullback move the previous day. The USD/CAD pair rebounds to near 1.4185 as the US Dollar outperforms its peers due to firm expectations that the next monetary policy adjustment by the Federal Reserve (Fed) will be on the upside.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% hi9gher to near 101.10, the highest level seen in over a year.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.05%	0.04%	-0.03%	0.11%	0.63%	0.40%	-0.04%
EUR	0.05%		0.07%	0.00%	0.14%	0.64%	0.43%	-0.01%
GBP	-0.04%	-0.07%		-0.04%	0.08%	0.59%	0.36%	-0.07%
JPY	0.03%	0.00%	0.04%		0.12%	0.64%	0.41%	-0.04%
CAD	-0.11%	-0.14%	-0.08%	-0.12%		0.52%	0.30%	-0.15%
AUD	-0.63%	-0.64%	-0.59%	-0.64%	-0.52%		-0.20%	-0.65%
NZD	-0.40%	-0.43%	-0.36%	-0.41%	-0.30%	0.20%		-0.46%
CHF	0.04%	0.00%	0.07%	0.04%	0.15%	0.65%	0.46%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

According to the CME FedWatch tool, the odds of the Fed hiking interest rates this year are almost 87%.

Hawkish Fed bets have escalated due to consistently accelerating core inflationary pressures and an improvement in labor demand.

Meanwhile, investors await the US preliminary S&P Global Purchasing Managers’ Index (PMI) data for June, which will be published at 13:45 GMT. The US Services PMI is expected to arrive at 51.0 in May, higher than 50.7 in May. Meanwhile, the Manufacturing PMI will likely come in lower at 54.7 from the previous reading of 55.1.

In the Canadian region, accelerating inflationary pressures and growing economic concerns have prompted fears of a stagflation. On Monday, Statistics Canada reported that the headline inflation rose to 3.2% Year-on-Year (YoY), higher than 3% estimates and the previous reading of 2.8%.

In the policy announcement last week, Bank of Canada (BoC) Governor Tiff Macklem warned of downside economic risks in the monetary policy conference. “Economy is weak but clearly not in recession,” Macklem said.

Economic Indicator

Consumer Price Index (YoY)

The Consumer Price Index (CPI), released by Statistics Canada on a monthly basis, represents changes in prices for Canadian consumers by comparing the cost of a fixed basket of goods and services. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.