Investors adjust positions before US CPI release, weighing Fed rate cut expectations and Middle East tensions.
The US Dollar firmed against the Canadian Dollar, erasing earlier CAD gains as traders awaited US Consumer Price Index data. The USD/CAD pair rose 15 pips to above 1.3930, though it remains down over 1% in the past two weeks.
Markets expect softer inflation figures, with analysts suggesting a 0.1% month-on-month core CPI print could reduce September Fed rate hike odds below 50%. ING noted such a scenario would likely weaken the USD, particularly against procyclical currencies.
Safe-haven demand also supported the USD amid escalating Middle East tensions, including attacks on vessels in the Red Sea.