The USD/CAD pair has retreated from a five-month high of 1.3846, trading around 1.3800 during European hours on Wednesday. The minor decline in the US Dollar is contributing to the downward pressure on the pair, despite the US Dollar Index remaining close to its recent peak.
Federal Reserve Chair Jerome Powell’s hawkish remarks have supported the US Dollar, with recent data suggesting minimal progress in inflation. This could lead to a prolonged period before reaching the 2% target.
The lower crude oil prices are weakening the Canadian Dollar, as Canada is a major oil exporter to the US. West Texas Intermediate (WTI) oil price has dipped to around $84.40 per barrel, impacting the CAD.
Concerns over oil supply due to tensions in the Middle East have been overshadowed by worries about global demand. Slow economic growth in China and expected rise in US commercial stockpiles are raising concerns about global demand for crude oil.
Canadian inflation data may influence the Bank of Canada’s decision on monetary policy adjustments in its upcoming June meeting. Core inflation indicators show signs of moderation, potentially leading to easing borrowing conditions.
Consumer Price Index rose by 0.6% month-on-month in March, slightly lower than expected but higher than the previous increase. Core CPI increased by 2.0% year-on-year, at a slower pace compared to the previous rise of 2.1%.