Canadian dollar flat as traders await Jackson Hole symposium

USD/CAD traded flat around 1.3850 in early European trade on Friday, with the market in a wait-and-see mode. Traders were cautious ahead of Fed Chair Powell's speech later at the Jackson Hole symposium, hoping for further clues on the monetary policy outlook.

**PCE data supports USD, but CAD shows no clear direction**

US July PCE price index released earlier this week showed inflation pressures remain sticky, with headline PCE up 3.7% year-over-year, slightly above the 3.6% forecast, while core PCE matched expectations at 3.3%. According to OCBC strategists, the inflation data kept market expectations alive that the Fed may still resume rate hikes, which strengthened the USD against most G10 currencies. However, USD/CAD did not show significant movement, reflecting the market's reluctance to take aggressive positions ahead of key events.

**Jackson Hole in focus, policy signals to set direction**

The market views this Jackson Hole symposium as a key venue for the Fed to clarify its inflation stance and policy credibility. OCBC strategists noted that questions around the Fed's reaction function, along with concerns that policymakers may ease their focus on inflation control, have heightened market attention on Powell's speech. They believe that if Powell and other Fed officials reaffirm their commitment to bringing inflation back to the 2% target, the USD could find support. For the CAD, the subsequent direction of the USD will directly determine whether USD/CAD can break out of its current narrow range.

**Technical side lacks momentum, awaiting catalyst**

USD/CAD has been holding near 1.3850 recently, with neither bulls nor bears showing a clear advantage. Ahead of Powell's speech, the market lacks sufficient catalysts to drive a clear trend in the exchange rate. Traders are largely staying on the sidelines, waiting for policy signals to emerge before making directional bets.