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USD / CAD - Canadian dollar awaiting US PCE data

- Eurozone inflation data muddies September ECB rate decision.

- Key US PCE data ahead.

- USD opens mixed with EUR underperforming.

USDCAD: open: 1.3546-50, overnight range: 1.3521-1.3556, close 1.3534, WTI $81.96, Gold $1944.79

The Canadian dollar consolidated yesterday's gains overnight ahead of today's key US Personal Consumption Expenditure data. Core PCE is reportedly the Fed's preferred measure of inflation, and the consensus forecast is for the July data to tick higher to 4.2% y/y from 4.1% in June. However, the PCE month-over-month data is expected at 0.2%, unchanged from June.

Weekly jobless claims are expected to rise by 5,000 to 235,000. Analysts are suggesting that if the PCE and jobless claims data are on the weak side of the equation, the Fed will be less motivated to increase interest rates any further. If so, the Canadian dollar may extend gains today.

Nevertheless, trading may be subdued due to the release of the nonfarm payrolls on Friday. NFP is expected to show a gain of 170,000 jobs in August, down from 187,000 in June. In addition, US ISM PMI is also on tap.

Canadian dollar traders may also get some insight into the outlook for domestic interest rates with the release of June GDP, which is expected to fall by 0.2% compared to the 0.3% increase in May.

The Canadian dollar also received some additional support from higher West Texas Intermediate oil prices, which climbed from $81.49/barrel to $82.40 in NY today. The rally is due to the EIA report that US crude inventories fell by 10.6 million barrels last week.

EURUSD traded in a 1.0847-1.0940 range and touched the bottom following the Eurozone inflation report. CPI rose 5.3% y/y in August (forecast 5.1%) while Core-CPI fell to 5.3% y/y as expected.

GBPUSD bounced in a 1.2674-1.2735 range, garnering a bit of support from comments by Bank of England Chief Economist Huw Pill. He said UK rates will rise even if the higher rates hurt the economy.

USDJPY traded in a 145.72-146.26 band. Industrial production data was weaker than expected (actual -2.0% vs forecast -1.4%) due to weak Chinese economic growth. However, Retail Sales managed to rise 2.1% in July, which took away some of the sting from the IP data.

AUDUSD is trading negatively in a 0.6466-0.6508 range due to broad US dollar demand.

Canada's Current Account data is on tap.