Ella 
USD/CAD rose above the 1.3500 mark in early Asian trade on Wednesday. Canadian inflation data was weaker than expected, weighing on the Canadian dollar (CAD) and becoming a “tailwind” for USD/CAD. The focus has shifted to Wednesday’s Federal Reserve meeting minutes. USD/CAD is currently trading around 1.3526, up 0.03% on the day.
Statistics Canada reported on Tuesday that Canada’s consumer price index increased at an annual rate of 2.9% in January, compared with 3.4% in December, lower than the 3.3% expected. Inflation data is within the Bank of Canada’s control for the first time since June, which could convince the Bank of Canada (BOC) to start considering an interest rate cut in the coming months.
Meanwhile, oil prices are facing some profit-taking and pulling back from three-month highs, which could put some selling pressure on the commodity-linked Canadian dollar as Canada is the largest oil exporter to the United States.
On the other hand, last week’s US consumer price index and producer price index (PPI) were stronger than expected, reducing the prospect of an interest rate cut by the Federal Reserve (Fed) in March. Traders see a 60% chance of no rate cut at the May Fed meeting and an 80% chance of at least a 25 basis point rate cut in June, according to the CME FedWatch tool.
Market participants will pay close attention to the minutes of the Federal Reserve meeting due later on Wednesday. Canadian retail sales for December are expected to be released on Thursday, with a monthly rate of 0.8% expected from -0.2% in the previous month.
