USD/CAD juggles with no clear direction

Key Movers

The US dollar started the week under modest selling pressure, eating into its gains on Friday. This came amid the Jackson Hole speech from US Federal Reserve Chairman Jerome Powell. The speech did not surprise markets, rather it was a mere repetition of an early Goldilocks scenario, an economy that is not too hot or too cold but sustains moderate economic growth with low inflation which allows a market-friendly monetary policy. This depicted yields spearing higher and rate cuts are being moved further down the line to mid-2024 at the earliest.
The GBP saw a modest recovery after a fresh 14-week low. However, the notion around the GBP remains bearish as the British economy is believed to be exposed to a potential recession due to the Bank of England’s (BoE) aggressive rate-tightening cycle. Major reasons markets are concerned that the British economy may step into a recessionary phase are the housing sector, economic activities, and the labor market. All are struggling to carry the heavy load of a vey hawkish and restricting monetary policy. An interest rate hike at the September monetary policy meet is on the charts and cannot be ruled out entirely as the core inflation is still more than thrice the desired rate of 2%. GBP was last seen trading at 1.2590 levels against the greenback.
The EUR had a hopeful start to the week with a modest upward momentum against the USD, moving above the 1.0800 levels. EUR/USD was last seen trading comfortably at 1.0809 levels. On the other hand, the internal conflicts between the European Central Bank (ECB) council members have surfaced around the probable extension of rigorous and hawkish measures beyond the summer period. These differences of opinion have started triggering a renewed sense of vulnerability and is negatively impacting the Euro. The hot data theme this week will be inflation, with Germany reporting on Wednesday and the eurozone on Thursday, both are expected to be somewhat flatter.
West Texas Intermediate (WTI) crude oil remains near the 79.80 level as it moved from a two-week resistance line to print the first increase during Monday’s European trading session.