USD/CAD edges higher near 1.3380 amid stable US Dollar, awaits Canadian Core CPI

• USD/CAD snaps its losing streak as the US Dollar holds its position above 102.50.
• BoC Governor Tiff Macklem’s hawkish comments might have supported the Canadian Dollar.
• Traders await Canadian Core CPI data for fresh impetus in inflation conditions.
• Fed members’ dovish remarks put pressure on the US Dollar.

USD/CAD halts its three-day losing streak, trading around 1.3380 during the Asian session on Monday. However, The Canadian Dollar (CAD) received a boost against the US Dollar (USD) following the hawkish comments made by the Bank of Canada’s (BoC) Governor Tiff Macklem on Friday. Speaking at the Canadian Club Toronto, he mentioned that once the BoC is confident that the economy is clearly on a path back to price stability, they will consider whether and when to lower the policy interest rate.

Governor Macklem clarified that it is still too early to contemplate interest rate cuts, emphasizing that they don’t necessarily have to wait until inflation returns all the way to the 2% target to consider easing policy, but it should be clearly headed in that direction. The BoC Consumer Price Index Core data for November will be released on Tuesday, hinting at the changes in prices of the cost of a fixed basket of goods and services.

The US Dollar Index (DXY) struggles to maintain its position after rebounding from a four-month low at 101.77 marked on Thursday. The DXY hovers above 102.50, by the press time. The Greenback received support from the enhanced short-term yield on the US Treasury bond. The 2-year US bond yield improved to 4.48% on Friday but trading lower at 4.43% at the time of writing on Monday. While 10-year US yield stands at 3.92%.

The USD might have received support from the mixed preliminary Purchasing Managers Index (PMI) data for December. The S&P Global Services PMI rose to 51.3 from 50.8, indicating growth, while the Manufacturing PMI declined to 48.2 from 49.4, suggesting contraction. Investor attention will now shift to Consumer Confidence and Existing Home Sales Change on Wednesday.

However, the Greenback could face pressure due to dovish comments from various Fed officials. Atlanta Fed President Raphael Bostic, on Friday, hinted at a potential interest rate cut in the third quarter of 2024 if inflation follows the expected trajectory. Additionally, Chicago Fed President Austan Goolsbee did not rule out the possibility of a rate cut at the Fed’s meeting next March.