As investors anticipate BOC and US Inflation, USD/CAD falls toward 1.2900

The USD/CAD pair is trading below the important support level of 1.2960 as investors support the Canadian dollar against the U.S. dollar on the strength of positive Canadian unemployment statistics. On a larger scale, the pair has depreciated progressively after retesting the key resistance level of 1.3083 on Wednesday.

The unemployment rate in Canada came in at 4.9%, below both estimates and the previous announcement of 5.1%. This has encouraged the Bank of Canada (BOC) to raise its interest rates on Wednesday by a reasonable amount. According to market consensus, the BOC may issue a 75-basis-point rate rise (bps). The occurrence of the same will increase the official interest rate to 2.25 percent.

Tiff Macklem, the governor of the Bank of Canada, is obligated to announce a significant interest rate increase due to the escalating inflationary pressures in the Canadian economy. May's inflation rate in Canada was 7.7 percent, a significant increase from the 6.8 percent figure reported in April.

On the dollar front, the US dollar index (DXY) has seen a little recovery at the opening. The DXY will stay on edge until Wednesday, when the US Consumer Price Index (CPI) will be released. The preliminary estimate for US inflation is 8.7%, which is 10 basis points (bps) higher than the previous estimate of 8.6%. A higher inflation reading will increase the likelihood that the Federal Reserve (Fed) would adopt an extremely hawkish posture at its monetary policy meeting in July.