The Canadian dollar has ticked higher in the Monday session. Early in North American trade, USD/CAD is trading at 1.2695, up 0.12% on the day. On the release front, there are no Canadian or US events on the schedule. On Tuesday, the US releases retail sales reports.
Tensions between North Korea and the US remain high, but the prevalent sentiment in the markets is that a diplomatic solution will be found to end the crisis. Still, Donald Trump and Kim Jon-un are unpredictable leaders, and any move by either side could easily ratchet up tensions and unnerve investors. Donald Trump continues to deal with domestic problems as well, and the White House faced stinging criticism from both Republicans and Democrats, as Trump failed to single out white supremacists for the violence in Charlottsville, Virginia, where one person was killed at a demonstration against far-right marchers.
More US inflation numbers, more disappointment for the markets. Consumer Price Index reports in June underscored a soft inflation picture, as both CPI and Core CPI showed negligible gains of 0.1%. This follows a 0.1% decline in the Producer Price Index for June. The persistently soft inflation indicators may hamper plans by the Federal Reserve to raise rates, as some FOMC members continue to advocate against a rate increase until inflation climbs closer to the Fed’s inflation target of 2%. However, inflation is not showing any signs of moving higher, which means that a December rate hike remains very much in doubt. Early in the year, a third rate hike seemed a foregone conclusion, but the lack of inflation and the inability of President Trump to push any major legislation through Congress has hindered Fed plans to raise rates. The odds for a December rate have dropped to 36%, according to the CME Group, pointing to wide skepticism about a rate hike before 2018.
