The USD/CAD pair saw a decline during the early Asian session on Wednesday, weakening to near 1.3925. The US Dollar (USD) edged lower against the Canadian Dollar (CAD) following inflation data that fell short of market expectations.
According to the US Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI) rose by 2.3% year-over-year in April, slightly below the 2.4% increase recorded in March and missing market expectations. This softer-than-expected inflation report prompted an immediate pullback in the Greenback.
On the other hand, the core CPI, which excludes volatile food and energy prices, increased by 2.8% year-over-year in April, matching both the previous reading and market forecasts. On a monthly basis, both the CPI and core CPI rose by 0.2%.
Trade Deal Optimism Helps Support USD
Despite the weaker inflation figures, optimism surrounding a potential tariff agreement between the US and China has helped temper concerns about a slowdown. Traders are dialing back recession fears, providing some support to the US Dollar in the near term. A potential de-escalation of the trade war between the two largest economies in the world has helped to stabilize market sentiment.
Crude Oil Gains Offer Support to CAD
On the Canadian Dollar front, gains in crude oil prices are providing support to the CAD. As the largest oil exporter to the US, Canada stands to benefit from higher oil prices, which tend to strengthen the CAD. The combination of this positive oil market momentum and weaker US inflation data could limit further upside for the USD/CAD pair.
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