MUFG Research maintains a bullish bias on the USD ahead of this week's US CPI print for the month of July on Wednesday. MUFG is long USD/CAD in its ToTW portfolio targeting a move towards 1.3420.
"The broadly positive backdrop for the US dollar will continue after Friday’s strong jobs report that helped put a 75bp rate hike back on the table for September. Comments over the weekend from San Francisco Fed President Daly and Fed Governor Bowman only helped to reinforce the potential for another 75bp rate increase. Governor Bowman was very explicit stating a “similar sized rate increase should remain on the table” until inflation declines in a “consistent, meaningful, and lasting way”," MUFG notes.
"US CPI data on Wednesday will of course be key this week but based on Bowman’s comment it is hard to see that evidence being in front of the FOMC by the September meeting unless we get a real surprise undershoot in CPI this week," MUFG adds.