The USD/CAD pair remained depressed below the 1.2700 mark through the early North American session and had a rather muted reaction to the mixed Canadian CPI report.
A combination of factors failed to assist the USD/CAD pair to capitalize on the previous day’s rebound from the post-US CPI swing lows to the 1.2600 mark, instead exerted some pressure on Wednesday. An extension of the recent bullish run in crude oil prices underpinned the commodity-linked loonie. Apart from this, renewed US dollar selling bias acted as a headwind for the major.
The USD continues to be weighed down by reduced bets for an imminent Fed taper announcement at the upcoming FOMC monetary policy meeting on September 20-21. The repricing of the likely timing of the Fed’s tapering move was evident from a softer tone around the US Treasury bond yields, which, along with the underlying bullish sentiment, undermined demand for the safe-haven greenback.
The USD bulls failed to gain any respite from Wednesday’s release of the stronger-than-expected Empire State Manufacturing Index, which jumped to 34.3 for the current month from 18.3 previous. From Canada, the headline CPI surpassed expectations and rose 4.1% YoY, though was offset by a slight disappointment from the Bank of Canada’s core CPI print, coming in at a 3.5% YoY rate.
Wednesday’s US economic docket also features the release of Industrial Production figures and Capacity Utilization rate. This, along with the US bond yields and the broader market risk sentiment, might influence the USD. Traders will further take cues from oil price dynamics to grab some short-term opportunities around the USD/CAD pair.