Ella 
The USD/CAD pair fell for the fourth consecutive day to around 1.3715 in early Asian trading on Wednesday. Crude oil prices rose to a two-month high, providing some support for the commodity-linked Canadian dollar. In addition, weak retail sales prompted traders to focus again on the timing of the Federal Reserve’s interest rate cut, which limited the upside of USD/CAD.
U.S. economic activity remained sluggish in the second quarter. The U.S. Commerce Department announced on Tuesday that the monthly rate of U.S. retail sales in May rose 0.1% after recording -0.2% in April, which was 0.2% lower than the expected value. The dollar was weak against major currency pairs after the release of the lower-than-expected retail sales report, as it increased the probability of the Federal Reserve starting to cut interest rates in the coming months.
Fed officials maintained a cautious stance and stressed the need for further confidence in good inflation indicators. On Tuesday, John Williams, president of the New York Federal Reserve, said that interest rates are expected to be gradually lowered as inflation retreats. Boston Fed President Susan Collins said that despite the rise in inflation, price growth continues to be above the Fed’s 2% inflation target, adding that it is too early to tell whether inflation is rising closer to the target.
On the Canadian dollar, the continued rise in crude oil prices could boost the Canadian dollar in the short term as Canada is the largest oil exporter to the United States.
The summary of the Bank of Canada’s deliberations will be released later on Wednesday, and traders will get more clues from the prospects of further rate cuts from the Bank of Canada. Last week, the Bank of Canada decided to cut its benchmark policy rate by 25 basis points to 4.75%, while sending signals for further rate cuts. Former Bank of Canada Governor David Dodge said last week that the move was “meaningful” and the timing of future rate cuts will depend on “whether the process of addressing inflation continues to make progress.”
