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USD / CAD - Canadian dollar support is crumbling

- Canadian inflation data overshadowed by US developments.

- FOMC minutes released this afternoon.

- US dollar consolidating recent gains and maintains a bullish bias.

USDCAD: open: 1.3486-90, overnight range: 1.3476-1.3510, close 1.3499, WTI $80.87, Gold $1906.22

The Canadian dollar is bumping against resistance again and that resistance is starting to crumble.

The currency enjoyed a bit of a rally after the July inflation report was hotter than expected. Headline CPI rose 3.2% in July, unchanged from June, but well-above the forecast of 2.8%. That result increased the odds that the Bank of Canada (BoC) would raise rates in September.

However the slight moderation of the BoC’s favourite inflation measures, CPI-Trim and CPI-median, which dipped to 3.65% from 3.7%, downgraded rate hike risks.

Attention quickly shifted to the US data where Retail Sales rose 0.7% m/m compared to 0.5% in June. The American consumer is still shopping, and that news coupled with the still tight labour market provides further justification for the Fed to increase rates.

Minneapolis Fed President Neel Kashkari appears to be leaning that way. He said “Are we done raising rates? I’m not ready to say that we’re done.”

Bond traders were spooked, and the US 10-year Treasury yield climbed to 4.23% before dropping to 4.19% in early NY trading today.

Wall Street traders were unhappy, and the S&P 500 closed down 1.16%. Asian traders followed Wall Street’s lead with Australia’s ASX 200 falling 1.50% and leading the other indexes lower. European traders are more cautious, and the major indexes are flitting around flat as are S&P 500 futures.

EURUSD traded within a range of 1.0899 to 1.0934, while ignoring Eurozone Q2 GDP which, at matched expectations. Additionally, Industrial Production showed a positive shift, rising by 0.5% month-on-month compared to May's revised figure of 0.0%.

GBPUSD climbed from 1.2688 to 1.2766, after the inflation data. Headline CPI increased by 6.8% year-on-year, slightly lower than June's 7.9%. Core-CPI remained steady at 6.9%, in line with June's figure.

USDJPY traded quietly in a 145.31-145.77 band, underpinned by firm US Treasury yields.

AUDUSD's traded in a 0.6429 to 0.6480 band with prices weighed down by ongoing concerns surrounding China's economic growth and the overall strength of the US dollar.

NZDUSD managed to recover losses from Tuesday's trading session, rallying from 0.5932 to 0.5993. This was mainly due to a "hawkish hold" stance adopted by the Reserve Bank of New Zealand (RBNZ). The RBNZ's left rates unchanged at 5.5%.

Today’s US data includes Industrial Production, and Capacity Utilization.