USD/CAD ticks up above 1.3850 with all eyes on the US PPI report

• The US Dollar crawls higher amid Canadian Dollar weakness and reaches fresh two-week highs above 1.3850.
• Downbeat data from Canada has offset the negative impact of rising Fed easing bets.
• US Nonfarm Payrolls have been revised sharply lower, adding pressure on the Fed to accelerate its easing cycle.

The US Dollar is trading higher for the second consecutive day against the Canadian Dollar. The pair has returned to levels beyond 1.3850 on Wednesday, as the weaker outlook of Canada's economy offset the impact of Fed easing expectations.

The US Dollar Index appreciated nearly 1% from its lows at 1.3725 earlier this month, as Canada's economy begins to show the negative impact of higher US tariffs. Data released last week revealed an unexpected decline in net employment that pushed the Unemployment rate to a four-year high.

Weak Canada's data, low Crude prices hurt the CAD

Along the same lines, Canada's Ivey PMI dropped from a healthy 55.8 level in July to the brink of stagnation, at 50.1 in August, pointing to a sharp slowdown in economic activity.

Beyond that, Oil prices, Canada's main export, remain close to multi-month lows, weighed by news of a further output hike, albeit a more moderate one than in previous months, and increasing concerns about a decline in global demand. This is another key factor behind the Canadian Dollar's weakness.

US Dollar upside attempts, however, have remained subdued, with traders raising their bets for Fed easing. The sharp downward revision of US Nonfarm Payrolls figures in the 12 months before March has cemented those hopes, and the market awaits upcoming US inflation data to assess the extent of next week's rate cut.