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USD / CAD - Canadian dollar sinking slowly

- Powell speech emboldens rate hike hawks.

- UK markets closed for bank holiday.

- USD dollar is modestly bid and consolidating gains.

USDCAD: open: 1.3597-01, overnight range: 1.3584-1.3607, close 1.3603, WTI $80.22, Gold $1914.14

The Canadian dollar is slowly sinking under the weight of US interest rate expectations. Traders raised the odds for the Fed to hike rates in November to around 60% following Fed Chair Jerome Powell's speech at the Jackson Hole Symposium on Friday.

Mr. Powell did not say anything new, but traders reacted to his remarks anyway. He said, "Although inflation has moved down from its peak, a welcome development, it remains too high. We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective."

When the dust had settled, Wall Street closed with small gains, and the US 10-year Treasury yield closed at 4.24%, where it is trading today. The US dollar finished with gains but below its peak levels.

The Canadian dollar is not getting much support from oil prices mainly because the July rally has stalled at the $85.00/b area and retreated back to the $80.00/b area in NY trading today. The outlook for increased supply due to higher US and Iran production, the easing of sanctions on Venezuelan crude, and concerns that Chinese economic growth has faltered are limiting gains. However, sanctions on Russian crude combined with Saudi Arabia's production cuts are providing some support.

The Canadian dollar is also weighed down by concerns that domestic economic growth will greatly underperform compared to that of the US. The latest American economic data suggests the Fed will achieve a "soft landing," while Canadian growth is falling fast. Friday's June GDP data is expected to show the Canadian economy shrank by 0.2%.

EURUSD firmed modestly inside a 1.0793 to 1.0822 band, finding some support from higher equity prices. However, gains were capped due to uncertainty surrounding ECB interest rates. European Central Bank President Christine Lagarde refrained from discussing potential rate changes in her Jackson Hole speech.

GBPUSD tracked EURUSD, rising from 1.2565 to 1.2611, but activity was subdued due to the UK Bank holiday.

USDJPY is in the middle of its overnight 146.27 to 146.62 band, with prices bolstered by expectations of higher US interest rates.

AUDUSD traded defensively in a range of 0.6401 to 0.6440 as support from the latest Chinese stimulus package faded.

The US and Canadian data calendars are empty