Ella 
In Asia on Wednesday, the US dollar/Canadian dollar rebounded from nearly four-week lows and recovered some of the losses from the previous day. USD/CAD managed to hold above the 1.3700 mark, but bullish momentum is lacking, so caution is needed before placing positions for a clear rebound.
Crude oil prices regained upward momentum amid estimates of falling U.S. crude inventories and risks of widening conflicts in the Middle East, which was seen as supporting the commodity-linked Canadian dollar and weighing on USD/CAD. Data released by the American Petroleum Institute (API) on Tuesday showed that U.S. crude oil inventories fell by 5.21 million barrels in the week to August 9, indicating increased demand from the world’s largest oil consumer.
Meanwhile, the U.S. dollar hovered near its lowest level in more than a week as U.S. producer price index (PPI) data on Tuesday was worse than expected and the market expected the Federal Reserve (FED) to cut interest rates further. In fact, the U.S. Bureau of Labor Statistics reported on Tuesday that the final demand producer price index fell sharply to 2.2% in July from an annual rate of 2.7%, indicating that inflation continues to slow.
Weak U.S. wholesale prices have increased market expectations that the Federal Reserve will cut interest rates by 50 basis points (bps) in September and suppressed U.S. bond yields overall. This, along with risk-on sentiment, continues to weigh on the safe-haven US dollar and prevent USD/CAD from rising higher. Therefore, the intraday rally could be entirely attributed to some position rebalancing ahead of key U.S. consumer inflation data later on Wednesday.
