USDCAD Market Opportunity Week of May 19–23, 2026

Core PCE measures what Americans are spending and what they pay for goods and services. The Fed uses it to decide whether to raise or cut interest rates. Core, means food and energy prices are left out.

Right now headline inflation sits at 3.5%. Core PCE - 3.2%. 0.3% gap exists because oil prices surged after US and Israel started war on Iran. Fed is making decision based on a number that understates what households are actually experiencing.

What to watch on May 28

• If Core PCE comes in above 3.2% Fed will have reason to raise rates. USDCAD will move up toward 1.38.
• If Core PCE comes in below 3.0% Vice versa - dollar will weaken and USDCAD will drop towards 1.35–1.36.

Why USD/CAD could go higher

Core PCE is hiding real inflation, real inflation in the US is higher than the official core reading suggests, and at some point the Fed will have to raise rates.

Canada's central bank already cut rates to 2.25% and has little room to move. If US inflation forces the Fed to raise rates while Canada stays put, USDCAD will move higher.

Market consensus still predicts a weakening dollar and a move to USDCAD toward 1.35, but to achieve this, the Fed needs to bring inflation under control.