Traders await US PCE inflation figures for Fed policy clues, while falling oil prices and US-Canada trade tensions pressure the CAD.
The USD/CAD pair climbed toward mid-1.3800s in Asian trading on Wednesday, remaining within Tuesday’s range. Markets are focused on the upcoming US Personal Consumption Expenditures Price Index, a key inflation gauge that could influence the Federal Reserve’s next policy move.
Expectations for a Fed rate hike have dimmed after softer July inflation data, with markets now pricing in a policy hold at the September 15–16 meeting. US Treasury plans to deploy nearly $1 trillion for long-term bond buybacks have further pressured US yields, limiting USD gains. Meanwhile, diplomatic progress between the US and Iran has pushed crude oil prices to a two-week low, undermining the commodity-linked Canadian dollar.
The deepening US-Canada trade dispute has also contributed to CAD weakness, offsetting some of the USD’s headwinds.