USD/CAD rebounds slightly ahead of inflation data release

Key Movers

The US dollar experienced a slight uptick, reaching 103.50 as it displayed a dual nature following a decrease in the US Gross Domestic Product (GDP) and JOLTS data, which raised concerns about the US economy's health and leaned towards a weaker dollar. However, data released today supported a stronger US Dollar as the US Personal Consumption Expenditures (PCE) data aligned with predictions and remained positive for the month. This reaffirms the US Federal Reserve's decision not to initiate early reductions. Initial jobless claims data also seems to have displayed a slight decrease, indicating that businesses are hesitant to release surplus staff. While the demand for labor might be slightly decelerating, the overall workforce continues to maintain a consistent or even expanding headcount. Consequently, inflationary pressures are expected to persist.

The core inflation rate in the Eurozone moderated to 5.3% from its previous level of 5.5%. The decline in core inflation is a positive development for the European Central Bank (ECB), even though the figures still fall short of the ECB’s overall target. The year-over-year inflation rate remained stable at 5.3% in August. The EUR/USD pair initially experienced a minor 15-pip decrease before stabilizing. Throughout the European session, the pair declined, partially due to a somewhat stronger USD.
Determining a clear direction for the pair is challenging, but the potential for further upside movement in EUR/USD should not be dismissed.

GBP/USD traded below 1.2676, which marks the lowest level since September 2020. The subsequent support level lies around 1.2585. The market has seen volatile price action, underlining its responsiveness to incoming news and the absence of a clear trend.