The USD/CAD is approaching the significant resistance level of 1.3300 during the early New York session, as investors exercise caution ahead of the release of United States inflation data and the upcoming interest rate decision by the Bank of Canada (BoC).

Anticipating mild bullishness, the S&P500 is expected to open higher following overnight gains. The US Dollar Index (DXY) is striving to extend its recovery towards the vicinity of 102.00. Meanwhile, the 10-year US Treasury yields are hovering close to 3.97%.

The scrutiny of the recently released US Nonfarm Payrolls (NFP) report has reinforced expectations of an interest rate hike by the Federal Reserve (Fed) during its July policy decision. Although the latest employment figures fell short of expectations, the upbeat labor cost indicates sufficient strength to warrant a more restrictive monetary policy.

Looking ahead, the Consumer Price Index (CPI) data scheduled for Wednesday will provide investors with further clarity on interest rate guidance. According to consensus estimates, the annualized headline CPI is projected to decelerate to 3.1% compared to the previous release of 4.0%. Similarly, core inflation is expected to soften to 5.0% from May’s figure of 5.3% for the same period.

A high level of activity is anticipated from the Canadian Dollar in anticipation of the Bank of Canada’s (BoC) monetary policy announcement. A Reuters poll suggests that BoC Governor Tiff Macklem may raise interest rates by 25 basis points (bps) for the final time, reaching 5%. With Canada’s inflation easing to 3.4% in May, further tightening of policy would sustain significant pressure.


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