The USD/CAD pair is trading flat with slight losses near 1.3680 in the early Asian session on Tuesday. The US Dollar is making a recovery as traders anticipate the release of Canadian Consumer Price Index (CPI) inflation data and US Retail Sales later in the day. Federal Reserve Chair Jerome Powell recently stated that the central bank will not wait for inflation to reach 2% before considering interest rate cuts.
Lower crude oil prices are weighing on the Canadian Dollar, as Canada is a major exporter of oil to the United States. This, coupled with subdued inflation expectations according to the Bank of Canada Business Outlook Survey, may prompt the BoC to cut rates further in the near future. On the other hand, the odds of a Fed rate cut in September have increased following last week’s cooler US inflation data.
Overall, market sentiment, the health of the economy, inflation, trade balance, and interest rates set by the Bank of Canada are key factors influencing the value of the Canadian Dollar. The price of oil, Canada’s largest export, also plays a significant role in determining the strength of the CAD. Additionally, macroeconomic data releases such as GDP, employment figures, and consumer sentiment surveys can impact the direction of the Canadian Dollar.