• USD/CAD has dropped sharply to near 1.3210 as Canadian Retail Sales have expanded to 1.1% vs. 0.2% as expected.
• Oil prices are expected to show some action after the release of the oil inventory data for the week ending June 16.
• The US Dollar Index is demonstrating signs of sheer contraction in volatility as investors are awaiting commentary from Jerome Powell.

The USD/CAD pair has witnessed selling pressure as Statistics Canada has reported surprisingly higher Retail Sales data (April). The economic data has expanded by 1.1% while the street was anticipating an expansion of 0.2%. Last month, Canadian Retail Sales contracted by 1.5%.

Upbeat Retail Sales data might force the Bank of Canada (BoC) to raise interest rates further as higher households' demand would eventually propel price pressures.

Analysts at CIBC affirm that some cracks appeared within the Canadian labor market in May, but these “may not yet be wide enough to convince the Bank of Canada that inflation is about to meaningfully cool off.”

Meanwhile, S&P500 futures have extended their losses as the market mood is turning precautionary ahead of Federal Reserve (Fed) chair Jerome Powell’s testimony. The US Dollar Index (DXY) is demonstrating signs of sheer contraction in volatility as investors are expected to build fresh positions after assessing commentary from Jerome Powell.

Investors are keenly focusing on whether Jerome Powell will stick to its prior guidance of pushing interest rates further by 50 basis points (bps) this year or to remain data-dependent.

On the oil front, oil prices are expected to show some action after the release of the oil inventory data by the United States American Petroleum Institute (API) for the week ending June 16.

It is worth noting that Canada is the leading exporter of oil to the United States and higher oil prices will support the Canadian Dollar