USD/CAD - Traders Brace for Inflation Figures Friday

Global growth is coming to the forefront again as investors pile into base metals with zinc hitting decade highs while aluminum is up 5.1% for the year. The rise in base metals is putting renewed interest in commodity-based currencies with the Australian and Canadian dollars making gains against the big dollar; the Aussie and loonie are neck and neck, trading left and right of parity. The Canadian dollar's biggest event risk will be tomorrow's Consumer Price Index figures, which when released, will have investors scrambling to make bets on the Bank of Canada next Interest Rate move. There is a valid argument that the BOC would like to have interest rates back to the 1% level before the oil glut crisis.

The U.S. Federal Reserve Minutes yesterday showed most members are divided on inflation and its outlook. Most members of the Federal Open Market Committee believe that inflation is moving to the downside, therefore, tightening is being ruled out for September and the purchase buyback of asset-backed securities and mortgages will remain intact with no reductions. Most members would like to see inflation over 2% before tightening, but some are worried about not acting soon enough. The U.S. dollar fell against its G10 currency pairs and equities made slight gains. On the data front, investors had weekly Initial Jobless Claims and Continuing Jobless Claims to ponder, with Philadelphia Fed Manufacturing figures and Industrial Production to follow.

Experts expect a range today of $1.2576 to $1.2669

European inflation is holding steady in July, as CPI data printed in line with expectations of 1.3% y/y on headline and core. Trade Balance surprised to the upside in June printing at 22.3 billion. The European Central Bank released its minutes this morning and the key takeaway is its concerns over the strength of the euro during a time when the economy is improving. This is a clear signal to the market that normalization for the ECB may be at a slower pace than expected. The euro has dropped and currently trading at $1.4799.

Observers expect a range today of $1.4760 to $1.4867

U.K. Retail Sales in July were positive as month-over-month and year-over-year printed better than expected at 0.5% and 1.5% respectively. Even with the supportive fundamental data, the pound is still soft. The market is pricing in a 23% chance of a rate hike by December. The sterling is currently trading at $1.6269.

Investors expect a range today of $1.6233 to $1.6307

Australian employment numbers released last night was mixed. 27,900 jobs were added in July, beating the forecast of 20,000. However, the number of full time jobs fell by -20,300 while part time jobs increased 48, 200. Unemployment rate holds steady at 5.6%. The Aussie traded higher overnight but was not able to hold onto its gains as it trades back into the red going into the North American trading session this morning.

Oil (WTI): $46.40 U.S. per barrel

Gold: $1,286.28 U.S. per ounce

Silver: $17.12 U.S. per ounce

Copper: $2.9386 U.S. per tonne

Dollar Index: 93.77


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