USD/CAD hits fresh three-month highs above 1.3900, focus on Fed Powell's speech

• USD/CAD has reached its three-month high at 1.3915 on Friday.
• CME FedWatch Tool indicates that markets are pricing a 74% chance of a September rate cut, against 82% on Wednesday.
• Canada's Industrial Product Price Index climbed 0.7% in July, exceeding expectations of a 0.3% rise, after a 0.5% gain prior.

USD/CAD remains stronger for the fourth successive session, reaching a three-month high at 1.3915 during the Asian hours on Friday. The pair appreciates as the US Dollar (USD) gains ground amid easing odds of a Federal Reserve (Fed) interest rate cut in September. Traders await the Federal Reserve (Fed) Chair Jerome Powell's speech at the Jackson Hole Symposium in Wyoming, which could offer fresh clues on the September policy outlook.

According to the CME FedWatch tool, Fed funds futures traders are now pricing in a 75% chance of a rate reduction in September, down from 82% on Wednesday. The rate cut likelihood reduced following the strong Purchasing Managers' Index (PMI) and rising Initial Jobless Claims data from the United States (US).

The preliminary S&P Global US Composite PMI inched higher to 55.4 in August, from 55.1 prior. Meanwhile, the US Manufacturing PMI rose to 53.3 from 49.8 prior, surpassing the market consensus of 49.5. Services PMI eased to 55.4 from 55.7 previous reading, but was stronger than the 54.2 expected. Moreover, US Initial Jobless Claims rose to 235K for the previous week, an eight-week high and above the consensus estimate of 225K, suggesting some softening in labor market conditions.

The upside of the USD/CAD pair could be restrained as the Canadian Dollar (CAD) may receive support amid a decrease in the scope for further Bank of Canada (BoC) rate cuts. Canada's Industrial Product Price rose 0.7% month-over-month in July, following a 0.5% gain in June and surpassing market expectations of a 0.3% increase.