The USD/CAD pair is slightly up in Monday’s London session but has been trading in a range of 1.3710-1.3780 from Thursday. The Loonie asset struggles to find direction as investors shift focus to the monthly United States (US) Retail Sales data for May, which will be published on Tuesday.

Investors will pay close attention to the US Retail Sales data for fresh cues on the Federal Reserve’s (Fed) policy outlook. The Retail Sales data is a close measure of consumer spending, which provides cues on the inflation outlook. This would give more clarity on the divergence between the Fed’s expectations of one rate cut this year and the two that financial markets are speculating about. Retail Sales are estimated to have expanded by 0.3% after remaining flat in April.

According to the CME FedWatch tool, the possibility of two rate cuts this year is very high and policymakers will start reducing from the September meeting.

Meanwhile, Fed officials continue to argue in favor of cutting interest rates only once this year as they want to see inflation declining for months to gain confidence in lowering interest rates. Fed policymakers remain concerned over reacceleration in price pressures due to premature rate cuts.

On the Canadian Dollar front, investors expect that the Bank of Canada (BoC) will deliver subsequent rate cuts in the July meeting. The BoC became the first among central banks of G-7 nations to start unwinding its restrictive monetary policy framework since the pandemic.

(The article was corrected at 12:30 GMT on Monday to say that "The USD/CAD pair is slightly up in Monday’s London session but has been trading in a range of 1.3710-1.3780 from Thursday not in a range of 1.710-1.3780")

USD/CAD

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