USD/CAD Holds Steady Despite Hot US PPI Data, Rate Cut Doubts Emerge

The hotter-than-expected PPI report, revealing a robust increase in core factory-gate inflation, has raised questions about the Fed's policy trajectory. This comes despite recent softer consumer inflation data and easing labor market conditions, which had fueled market expectations of rate cuts starting in September.

Market Reactions and Outlook

While the US Dollar Index (DXY) dipped below 104.00 following the PPI report, the USD/CAD pair held its ground, supported by expectations of further rate cuts by the Bank of Canada (BoC). The BoC's June rate cut, the first in over two years, and weaker Canadian labor market data have solidified these expectations.

Meanwhile, the S&P 500 opened higher, indicating a positive risk sentiment among investors, while the 10-year US Treasury yield retreated from its intraday highs to near 4.20%.

Key Points:

• USD/CAD remains resilient despite hotter-than-expected US PPI data.
• Doubts emerge regarding the Fed's September rate cut timeline.
• Market expectations for BoC rate cuts support the USD/CAD pair.
• S&P 500 opens higher, indicating positive risk sentiment.

Technical Outlook:

The USD/CAD pair is expected to remain range-bound in the near term, as investors weigh the conflicting signals from US and Canadian economic data. Key support levels to watch include 1.3600 and 1.3550, while resistance levels are seen at 1.3650 and 1.3700.