USD/CAD CONSOLIDATES AHEAD OF BOC AND KEY DATA

USD/CAD all depends on the BoC this week and the build-up to the Fed next week. 

USD/CAD is flat on the day following stock market volatility. 

USD/CAD is flat on the day after travelling between a low of 1.3346 and a high of 1.3413 so far while US stocks have been volatile making for choppy trading conditions in the forex space on Tuesday.

Stocks took a breather after a two-day rally, with earnings from major companies starting to roll in. Market participants also digested economic data on manufacturing which led to volatility while the New York Stock Exchange saw an unusual number of halts at the open.

Meanwhile, we have important events coming up in the forex commodities complex in NZ and Aussie CPI ahead of critical US economic data later in the week. The main focus is on the Bank of Canada, Wednesday, and the Federal Reserve at the start of next week.

There are a lack of catalysts outside of teeth data with the Fed officials out on the blackout week ahead of the highly anticipated Fed interest rate decision. The market is running on Fed-official-fumes following the speakers that commented on their outlooks for monetary policy in the build-up to next month's Fed meeting. 

The most hawkish of comments came from St. Louis Federal Reserve's President James Bullard who said US interest rates have to rise further to ensure that inflationary pressures recede.

''We’re almost into a zone that we could call restrictive - we’re not quite there yet,” Bullard said Wednesday in an online Wall Street Journal interview. Officials want to ensure inflation will come down on a steady path to the 2% target. “We don’t want to waver on that,” he said.

“Policy has to stay on the tighter side during 2023” as the disinflationary process unfolds, Bullard added.

Bullard has pencilled in a forecast for a rate range of 5.25% to 5.5% by the end of this year.

However, there have been bearish tendencies in the US data of late for the US Dollar which has remained under pressure for the best part of the last couple of weeks. Economic reports, such as Producer Price Index and Retail Sales have shown disinflationary tendencies, reinforcing expectations that the Fed will continue to reduce its tightening pace in upcoming meetings.