USD/CAD under pressure following Canadian retail sales data

Key Movers

The US dollar index (DXY) reached 102.5, extending its strength streak for 5 consecutive days. This upward trend stems from growing investor confidence that the Federal Reserve will resume raising interest rates later this year, following a temporary pause in June. Fed Chair Jerome Powell highlighted the distance to be covered to achieve the 2% target inflation rate, suggesting that it might be appropriate to increase interest rates by year-end. In its recent report to Congress, the central bank emphasized that inflation in critical sectors of the US services industry remains elevated and shows no signs of lessening.

The EUR continues to lack a definite path, resulting in the EUR/USD being influenced by uncertain price movements around the 1.0900 mark today. This absence of a clear direction may be attributed to investors exercising caution ahead of Jerome Powell's upcoming semiannual testimony before Congress later today. While the focus today will be on Powell's testimony, markets are watching the forthcoming interest rate decisions of both the Fed and European Central Bank (ECB) during their upcoming meetings.

The pound experienced a momentary dip below 1.2700 against the USD before making a slight recovery. Despite the release of notable inflation data for May in the UK, the prevailing cautious sentiment in the market makes it challenging for the GBP to attract interest. The annual Consumer Price Index (CPI) in the UK showed a growth rate of 8.7% in May, as revealed by the latest data released by the UK Office for National Statistics. This acceleration matched the rate in April and aligns with the market consensus of an anticipated 8.4% rise. In response to the inflation data, UK Finance Minister Jeremy Hunt acknowledged the detrimental impact of high inflation on families and businesses throughout the country. He emphasized the government's commitment to assist the Bank of England (BoE) in mitigating inflationary pressures, stating, "We will not hesitate in our resolve to support the Bank of England as it seeks to squeeze inflation out of the economy.”