Ella 
In early Asian trading on Thursday, the USD/CAD currency pair was in negative territory for the second consecutive day. The U.S. dollar (USD) resumed its downward trend and fell below the 103.00 mark, pushing USD/CAD lower. Investors awaited Thursday’s U.S. retail sales data, which is expected to rise 0.8% monthly in February, to provide fresh impetus to the market. As of press time, USD/CAD was trading at 1.3468, down 0.02% on the day.
Better-than-expected U.S. inflation data released earlier this week may keep the Federal Reserve from cutting interest rates until at least the summer. Headline inflation was at an annual rate of 3.2%, up from 3.1% in January, while core inflation fell to an annual rate of 3.8%, down from 3.9% in the previous month. Market participants will get more clues from U.S. retail sales data for February as the data could influence the Federal Reserve’s next move at its March meeting, scheduled for next week. A strong reading could convince the Federal Reserve to focus on more data and save policymakers from rushing to cut interest rates, which could boost the U.S. dollar (USD) and create a “tailwind” for the USD/CAD pair.
On the other hand, the Bank of Canada (BOC) kept interest rates unchanged earlier this month, largely in line with market expectations. Bank of Canada Governor Tiff Macklem stressed that lowering inflation closer to target is the central bank’s top priority. The market expects the Bank of Canada to take aggressive action or cut interest rates only after the Federal Reserve, which may be where the Canadian dollar’s (CAD) upside potential lies in the coming months.
Meanwhile, rising crude oil prices could temporarily boost the commodity-linked Canadian dollar, as Canada is the largest oil exporter to the United States.
