USD/CAD retreats from one-week high amid weaker USD, downside seems cushioned – by hareshmenghani USDCAD Fed Bonds Recession Currencies
area during the first half of the European session. The pullback is sponsored by a modest US dollar weakness, though the fundamental backdrop supports prospects for the emergence of some dip-buying.
Investors started pricing in the possibility of a full 1% rate hike at the next FOMC policy meeting on September 20-21 following the release of stronger US consumer inflation data on Tuesday. This is reinforced by a fresh leg up in the US Treasury bond yields. In fact, the yield on rate-sensitive two-year US government bonds climbs to an almost 15-year high and the benchmark 10-year US Treasury note holds steady just below the YTD peak touched in June.
Hence, it will be prudent to wait for strong follow-through buying before confirming that the previous day's solid recovery of over 200 pips from the vicinity of mid-1.2900s has run out of steam. Market participants now look forward to the US Producer Price Index , which, along with the US bond yields and the broader risk sentiment, will influence the USD.
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