US dollar rises slightly ahead of data releases

Key Movers

In Europe, the EUR/USD pair dipped by around -0.39% so far today to the 1.0848 level. European Central Bank (ECB) council member Luis de Guindos stated that “inflation data is practically in line with our projections.” He added that it is prudent to wait until September to set the interest rate policy due to the high levels of uncertainty and emphasized the need to closely monitor wage inflation developments. However, he noted that geopolitical risks, which continued to increase globally, are a greater concern than inflationary pressures.

The pound held steady yesterday as markets anticipated the data set to be released tomorrow. Markets expect the data to show a slight increase from 52.1 last month to 52.5, and this has largely been priced in. If the number exceeds expectations, the pound could attract renewed buying interest as markets might further discount the possibility of rates remaining higher for longer in the UK.

The Canadian dollar weakened to a five-week low against its US counterpart on Monday as markets raised their bearish bets on the currency ahead of a potential interest rate cut this week by the Bank of Canada (BoC). The BoC is anticipated to cut rates once again by 25 basis points (bps) to 4.5% as inflation eases. Markets have priced in nearly 93% odds of BoC rate cuts on Wednesday and a total of 75 bps cut this year. "A rate cut is likely to be delivered," said Taylor Schleich, rates strategist at the National Bank of Canada. Meanwhile, oil demand concerns and easing geopolitical fears might drag crude oil prices lower and undermine the commodity-linked Canadian Dollar (CAD) in the near term. West Texas Intermediate (WTI) crude oil was down by around -1.4% this morning to $77.30 per barrel. The recent slump in oil prices, to over a one-month low, has been seen as a key factor undermining the commodity-linked Loonie and acting as a tailwind for the USD/CAD pair.