USD/CAD Stays Below 1.3700 as Markets Await US CPI Data

USD/CAD Stays Below 1.3700 as Markets Await US CPI Data

Tight Range Trading Amid CPI Anticipation

The USD/CAD currency pair is holding in a narrow band just below 1.3700 in Wednesday's European session, with traders cautious ahead of the key US Consumer Price Index (CPI) report for May 2025. The data is expected to be pivotal in determining the direction of Federal Reserve (Fed) monetary policy and market sentiment going forward.

US Inflation Expectations Build

Economists forecast that headline US inflation rose to 2.5% year-on-year in May, up from 2.3% in April. The core CPI, which excludes food and energy, is expected to edge higher to 2.9%, compared to 2.8% previously.

These figures are seen as a potential consequence of President Trump’s renewed tariff policy, and may reinforce the Fed’s position to hold interest rates steady until the full economic effects of the new policies are understood.

Canadian Dollar Pressured by Oil Weakness

The Canadian Dollar (CAD) remains under pressure due to softening oil prices, which are a key driver of Canada's export revenues and economic health. Despite supportive fundamentals earlier in the year, oil’s recent pullback has dented demand for the Loonie.

Technical Outlook and Risk Drivers

USD/CAD is showing signs of sideways consolidation, with near-term resistance at the 1.3700 level and support near 1.3650. A hotter-than-expected CPI print could push the pair higher, while softer inflation could lead to USD weakness and give CAD bulls room to challenge key resistance.

Internal Linking Suggestions for Tredu.com:

• Live USD/CAD Forex Chart
• CPI Economic Calendar - USA
• Federal Reserve Rate Decision Tracker
• Crude Oil Market Insights

Key Takeaways:

• USD/CAD remains subdued under 1.3700 ahead of US CPI release.
• US inflation expected to show further acceleration in May.
• Weak oil prices weigh on the Canadian Dollar.
• Fed policy expectations hinge on CPI confirmation of tariff impacts.