USD/CAD Stays Elevated as Weak US Inflation Fails to Lift the Loonie

USD/CAD continues to trade near the 1.36 region, holding steady even after softer US inflation data increased expectations for future interest-rate cuts. The pair has remained supported for several sessions, showing that demand for the US Dollar is still firm despite signs of cooling price pressures.

Fresh figures revealed slower US consumer inflation in January, reinforcing market views that the Federal Reserve could begin easing policy later this year. However, the Dollar showed resilience as investors balanced the data against broader global risks.

Cooling CPI Data Offers Limited Relief

Headline inflation slowed on both a monthly and annual basis, while core prices rose in line with expectations. Under normal conditions, such results might weaken the Greenback. Instead, currency markets remained cautious, keeping USD/CAD supported as traders favored safety and liquidity.

This reaction highlights how macro uncertainty is currently outweighing inflation trends in shaping short-term FX flows.

Trade Uncertainty and Oil Prices Pressure the Canadian Dollar

The Canadian Dollar struggled to capitalize on softer US data amid renewed trade concerns. Reports suggesting possible changes to the United States–Mexico–Canada Agreement have unsettled sentiment, adding another layer of risk for Canada’s export-driven economy.

At the same time, falling crude prices have weighed on the Loonie. West Texas Intermediate slipped back toward $62.50 after reaching recent highs earlier in the week. Since energy exports play a major role in Canada’s revenue stream, weaker oil often translates into softer demand for the currency.

Markets Await Canadian Inflation Clues

Looking ahead, investors are turning their attention to Canada’s upcoming CPI release, which could provide guidance on the next steps from the Bank of Canada. Traders are watching closely to see whether inflation trends justify tighter policy or continued caution.

Until clearer signals emerge, USD/CAD is likely to remain influenced by oil movements, trade headlines, and shifting expectations around US monetary policy.

For now, the pair holds its ground, supported by steady Dollar demand and ongoing uncertainty surrounding Canada’s economic outlook.

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