• USD/CAD falls to near 1.3460 with US core PCE inflation and Canadian Q2 GDP data in focus.
• The Fed is widely anticipated to start reducing interest rates in September.
• Weak Canada GDP data would prompt the BoC to ease monetary policy further.

The USD/CAD pair falls to near 1.3460 in Thursday’s Asian session. The Loonie asset drops as the US Dollar (USD) struggles to hold Wednesday’s recovery move. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges lower from 101.18 after a strong recovery from the fresh annual low of 100.50.

The US Dollar is expected to remain on the tenterhooks as investors look for the United States (US) core Personal Consumption Expenditure price index (PCE) data for July, which will be published on Friday. The PCE report is expected to show that year-on-year core inflation rose at a faster pace of 2.7% from 2.6% in June, with monthly figures growing steadily by 0.2%. The inflation data would significantly influence market speculation for the Federal Reserve’s (Fed) September monetary policy.

Currently, financial market participants seem confident that the Fed will start reducing interest rates in September. However, traders remain split over whether the potential size of the rate-cut would be gradual or a hefty one.