USD/CAD remains sideways above 1.3600 even though US PPI rise strongly

• USD/CAD remains in a tight range above 1.3600 despite US PPI turning out hotter than expected.
• Market speculation for Fed rate cuts in September remains firm.
• The weak Canadian job market boosts prospects of more rate cuts by the BoC.

The USD/CAD pair doesn’t move much from its current range above 1.3600 in Friday’s American session even though the United States (US) Bureau of Labor Statistics (BLS) has reported that the producer inflation rose at a faster-than-expected pace in June.

The Producer Price Index (PPI) report showed that the core factory-gate inflation grew at a robust pace of 3.0% than the estimates of 2.5% and the prior release of 2.6%, upwardly revised from 2.3%. Also, the underlying inflation rose strongly by 0.4% from the consensus of 0.2% and the former reading of 0.3%, upwardly revised from its unchanged position.

Hotter-than-expected producer inflation has raised doubts over strong market speculation for the Federal Reserve (Fed) to begin reducing interest rates from the September meeting, which were prompted by softer-than-projected consumer inflation and easing labor market strength.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, has declined further to near 104.00. The opening of the S&P 500 on a positive note indicates a higher risk appetite of market participants. 10-year US Treasury yields surrender their intraday gains and fall back to near 4.20%.

Meanwhile, the Canadian Dollar remains on the backfoot amid expectations that the Bank of Canada (BoC) will cut interest rates again. Market speculation for back-to-back rate cuts by the BoC rose due to weak Canadian labor market conditions. The BoC started reducing its key borrowing rate from the June meeting after maintaining a restrictive interest rate framework for more than two years.