USD/CAD finds cushion slightly below 1.3700 ahead of US PMI and Canadian Retail Sales

• USD/CAD witnesses buying interest below 1.3700 as the US Dollar rises further.
• The Fed is expected to begin lowering interest rates in September.
• Investors see the Canadian Retail Sales coming out of contraction trajectory.

The USD/CAD pair rebounds strongly after sliding slightly below the crucial support of 1.3700 in Friday’s European session. The Loonie asset recovers as the US Dollar (USD) exhibits strength on prospects that the Federal Reserve (Fed) will lag behind its peers in an attempt to commence its policy-easing process.

Market sentiment remains uncertain as global PMIs have underperformed against expectations. S&P 500 futures have posted some losses in the London session. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps to six-week high near 105.90.

Currently, financial markets expect that the Fed will start reducing interest rates from the September. On the contrary, various central banks including the Bank of Canada (BoC) has already pivoted to policy normalization.

Meanwhile, investors await the preliminary United States (US) S&P Global PMI data for June, which will be published at 13:45 GMT. The Manufacturing and Services PMI are expected to have expanded at a slower pace. The PMI data will indicate the economic health of the economy, which investors expect is off from a strong outlook amid deepening consequences of higher interest rates by the Fed.

On the Loonie front, the Canadian Dollar will dance to the tunes of the Canada’s Retail Sales data for April, which will be published at 12:30 GMT. On month, the Retail Sales are expected to have risen by 0.7% after contracting straight for three months. The Retail Sales data is a measure to consumer spending, which provide cues about the inflation outlook.