Ella 
During the European session on Wednesday, USD/CAD rose to around 1.3560, trying to halt a three-day losing streak. A rebound in the U.S. dollar helped the pair gain.
West Texas Intermediate (WTI) crude oil prices continue to move higher, currently rising to $88.70 per barrel. Oil prices held steady near 10-month highs and continued to find strong support on worries about tightening global supplies.
Oil prices continue to be supported by announcements from the world’s two largest oil producers, Saudi Arabia and Russia, of further oil supply cuts for the remainder of 2023, adding to the supply crunch.
Rising oil prices provided strong support for the Canadian dollar. In addition, the recent sluggish performance of the US dollar (USD) is also negative for USD/CAD. Together, these factors have contributed to a stronger Canadian dollar.
The U.S. Dollar Index (DXY), which measures the greenback’s performance against a basket of six other major currencies, pared its losing streak. Spot prices fluctuated higher around 104.80 as U.S. Treasury yields rose and markets remained cautious ahead of U.S. inflation data.
The U.S. Consumer Price Index (CPI) is expected to increase by 0.5% on a monthly basis and by 0.2% on a monthly basis. Additionally, core consumer price index is expected to hold steady at 0.2%. Rising inflation could reinforce the Fed’s current hawkish sentiment.
Inflation data has the potential to provide a more accurate picture of inflationary trends in the U.S. economy and have a considerable impact on market sentiment and USD/CAD trading options.
Markets expect the Fed to further tighten monetary policy and attempt to raise interest rates by another 25 basis points before the end of 2023. Additionally, dollar bulls are cheering that interest rates may remain elevated for an extended period.
