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AUD/USD and USD/CAD firm after weaker US CPI lifts rate easing bets
US headline CPI fell 0.4% month over month in June, pushing expectations of a more accommodative Federal Reserve and lifting commodity-linked currencies, while the Bank of Canada’s decision remains a key driver for USD/CAD.
Commodity-linked currencies rose against the US dollar after US inflation data came in weaker than forecast, with Action Forex citing a broader shift toward expectations that the Federal Reserve could take a more accommodative policy stance.
The June Consumer Price Index slowed to 3.5% year over year versus 3.8% expected, while core inflation eased to 2.6% year over year from 2.8% expectations. On a monthly basis, headline CPI unexpectedly fell 0.4%, and core CPI was unchanged.
The report added pressure on the dollar, supporting both AUD/USD and USD/CAD, but Action Forex noted that the next direction for USD/CAD depends largely on the Bank of Canada’s upcoming interest rate decision, its updated Monetary Policy Report, and the governor’s press conference.
Traders were also set to watch the US Producer Price Index for additional inflation clues, and oil inventory data that can influence the Canadian dollar, as well as technical levels cited for AUD/USD around 0.7000 and 0.7080 to 0.7130, and USD/CAD with a key area around 1.3960 to 1.4020 and resistance near 1.4120.