The USD/CAD pair is trading near 1.3770 in Monday’s New York session, with the US Dollar remaining strong against the Canadian Dollar. This is due to reduced expectations of a Federal Reserve rate cut in September following a positive US Nonfarm Payrolls report for May, which showed strong labor market conditions and higher-than-expected wage growth.
Investors now believe that the Fed may only cut interest rates once this year, possibly in November or December. They are closely watching for cues on the interest rate outlook from the upcoming US Consumer Price Index data for May and the Fed’s monetary policy meeting scheduled for Wednesday.
Inflation expectations for May show a slight decrease in annual core inflation to 3.5% and steady growth in headline inflation to 3.4%. The Fed is expected to maintain interest rates at 5.25%-5.50% with a hawkish outlook as they work towards achieving their target inflation rate of 2%.
On the Canadian Dollar front, investors are awaiting a speech from Bank of Canada Governor Tiff Macklem on Wednesday. This speech will provide insights into whether the central bank plans to announce further rate cuts after lowering rates last week for the first time in four years.