USD/CAD holds below the 1.3600 area, eyes on US GDP, NFP

• USD/CAD hovers around 1.3595 after retreating from a three-month high of 1.3640.
• Fed Chairman Jerome Powell remarked that the central bank is prepared to hike interest rates further if required.
• A decline in oil prices weakens the Canadian Dollar.
• Investors await the US GDP, core PCE, and Nonfarm Payrolls due later this week.

The USD/CAD pair loses some ground below the 1.3600 mark after retracing from 1.3640, the highest level since May. The major pair currently trades near 1.3596, losing 0.03% for the day.

The economic data on Friday showed that the University of Michigan’s (UoM) Consumer Confidence Index for August declined to 69.5 from 71.6 in July and was revised from the first reading of 71.2. Furthermore, the Current Conditions Index dropped from 76.6 to 75.7 (from 77.4), while the Expectations Index fell from 68.3 to 65.5 (from 67.3).

The Federal Reserve (Fed) Chairman Jerome Powell remarked on Friday at the Jackson Hole Economic Symposium that the central bank is prepared to hike interest rates further if required, and that the next rate rise would be determined by data. Powell also said that the robust economic growth and tight labor market conditions might pave the path for a tightening cycle to continue. He added that if the data do not show indications of softening, additional rate rises would be appropriate. Following the hawkish comments, the Greenback attracts some buyers.

Furthermore, Philadelphia Fed President Patrick Harker said that he does not see the need for additional rate hikes at this time and the Fed should hold rates steady and observe the impact of policy on the economy. Meanwhile, Cleveland Fed President Loretta Mester said that GDP and labor market data show that the economy is gaining momentum. She emphasized that the current rates are not restrictive enough to reach the inflation target and a lower growth rate would be essential to moderate inflation.

On the Loonie front, monthly Canadian Retail Sales for June expanded by 0.1% from the previous month. The figure came in better than the expectation of 0%. On a monthly basis, Retail Sales declined 0.8%, worse than the market consensus of an increase of 0.3%, Statistics Canada showed last week. The better-than-expected Canadian data prompted the possibility of more tightening policy from the Bank of Canada (BoC). However, a decline in oil prices weakens the Loonie as Canada is the largest exporter of crude to the US.

In the absence of top-tier economic data released from Canada, the USD/CAD pair continues to be at the mercy of USD price dynamics. The US preliminary Gross Domestic Product Annualized (GDP) for the second quarter will be released on Wednesday. The growth number is expected to remain at 2.4%. The US Core Personal Consumption Expenditures (PCE) Index and the weekly Jobless Claims will be due on Thursday. The key event will be the Nonfarm Payrolls (NFP) data on Friday. Traders will take cues and find trading opportunities around the USD/CAD pair.