USD/CAD retreats from weekly high, back around 1.2900 post- US PCE inflation/Canadian GDP

  • USD/CAD trimmed a part of its intraday gains amid modest USD pullback post-US PCE inflation data.
  • The ongoing decline in crude oil pricesd the loonie and continued lending some support.
  • The backwards-looking monthly Canadian GDP report did little to provide any impetus to the major.

The USD/CAD pair quickly retreated a few pips from the weekly high post-US/Canadian macro data and was last seen trading around the 1.2900 mark during the early North American session.

The US Bureau of Economic Analysis reported that the Core Personal Consumption Expenditures (PCE) Price Index – the Fed’s preferred inflation gauge – rose 0.3% MoM in May. This was slightly below the 0.4% anticipated and matched the previous month’s reading. Furthermore, the yearly rate moderated in line with expectations, to 4.7% from 4.9% in April.

Additional details revealed that personal spending growth notably slowed to 0.2% in May and the previous month’s reading was also revised down to 0.6% from 0.9% originally reported. The softer data, along with a further decline in the US Treasury bond yields, forced the US dollar to trim a part of its intraday gains and capped the USD/CAD pair.

The downside, however, remains cushioned amid the ongoing retracement slide in crude oil prices, which tend to maintain the commodity-linked loonie. The worsening global economic outlook, which could stall fuel demand recovery, and a rise in the US fuel stocks dragged crude oil prices further away from a one-and-half-week high touched the previous day.

This, to a larger extent, overshadowed mostly in-line monthly Canadian GDP report, showing that the economy expanded by 0.3% in April. This marked a sharp deceleration from the 0.7% growth recorded in the previous month. The backwards-looking data, however, did little to provide any meaningful impetus to the Canadian dollar or influence the USD/CAD pair.

Technical levels to watch

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