USD/CAD Rises Toward 1.3800 as Investors Brace for US CPI and Weak Oil Pressures Loonie

USD/CAD Climbs as Traders Await Key US Inflation Data

The USD/CAD pair is extending its recent upward momentum, trading close to 1.3800 on Tuesday, as investors show caution ahead of the pivotal US Consumer Price Index (CPI) release for July. The US Dollar (USD) remains firm amid inflation concerns, while the Canadian Dollar (CAD) is under pressure from weak oil prices and a deteriorating domestic outlook.

Markets are pricing in the possibility that headline inflation in the US accelerated to 2.8% year-over-year in July, up from 2.5% in June, with core inflation expected to hit 3.0%—the highest since February. If realized, such a print could dampen hopes for a near-term Fed rate cut, especially in light of last week’s dovish Fed rhetoric and soft labor data.

“The market continues to be wary of a bigger-than-expected surge in inflation,” analysts note. “That would confirm the impact of tariffs on consumer prices and may prompt a hawkish shift from Fed doves.”

Oil Price Slump Adds to CAD Weakness

Meanwhile, the Canadian Dollar is being dragged lower by declining Oil prices, with WTI Crude hovering near two-month lows. As a commodity-linked currency, the CAD is particularly sensitive to Oil market fluctuations.

Last week’s disappointing Canadian employment report further pressured the currency, with growing speculation that the Bank of Canada (BoC) could resort to additional rate cuts in the coming months to support the weakening economy.

The result is a four-day winning streak for USD/CAD, with the risk tilted to the upside if US inflation data surprises to the upside.